Justin Ko, (whom I take to be a student) at the Harvard University – Harvard Law School; University of Macau, Faculty of Law has produced a really useful primer on China’s biggest banks.
Who cares? Investors should have (but so many haven’t!) as these have been great investments. Below you see a personal holding over the last decade, the Bank of China #03988. Note especially the HUGE difference in performance between the stock price and the stock price adjusted to reflect the effect of dividends.
The paper is divided into four sections, one for each bank, and takes us through their history, their IPOs their principal functions and recent developments. Briefly:
ICBC: With revenues higher than Samsung it’s described as ‘The Technology Bank’. There’s fun anecdote here as to why they were the principal financier of the Tesla gigafactory in Shanghai and how they often end up as equity partners in young technology companies.
Bank of China: Oldest of the big-4 this is described as ‘The Belt and Road Bank’. With it’s background in commercial and overseas operations it’s a natural to partner with Chinese companies operating abroad. Fun fact; the Taiwan branch is reported to be their most profitable.
Agricultural Bank: As it name suggests the bank is rooted in the agricultural sector but as that’s shrunk in importance it’s focus has naturally shifted. Seen as a weak bank in the past due to it’s hayseed customer base these cautious and regular savers are now a big asset.
China Construction Bank (CCB): This is described as principally involved in ‘Building Dreams’. Need a railway track laid, oil refinery built or Tiananmen Square repaved (they financed this in the late ’50s)? These are your guys.
The only flaw in the work, which may be a deliberate omission (because it’s a bit complicated, but not that much if I can understand it) is the magic of how these banks were capitalized in the early noughties. Understanding that process gave me the confidence to become an investor way back and is why I’m likely to remain a holder for the indefinite future.
You can access the work in full via this link China’s Big Four Banks.
Happy Sunday.