Why China Big Four banks are still attractive despite softer economic growth, tighter margins

AMID the global tightening cycle, the People's Bank of China (PBOC) is moving in the opposite direction. In January 2022, key lending rates were cut for the first time in almost 2 years to tackle an economic slowdown, exacerbated by a property market downturn and a strict zero-Covid policy. The PBOC could continue easing in the first half of 2022, and we may see more rate cuts.

Against this backdrop, many investors became concerned over the growth prospects and attractiveness of the China Big Four banks - Industrial & Commercial Bank of China; China Construction Bank; Bank of China and Agricultural Bank of China. However, with a price-to-book (PB) multiple of only 0.4 times, we believe that the China Big Four banks are still among the most attractive investment ideas in terms of capital gains and dividend yield.

1. Loan growth likely in double digits