Asia Pacific: Banks -...
Transcript of Asia Pacific: Banks -...
August 12, 2016
Asia Pacific: Banks
Equity Research
Asia financials’ high dividend yields – Illusion or opportunity?
The chase for yield looks here to stay
Real bond yields are currently zero or negative in
most developed markets. Banks appear to have
been left behind in the chase for yield with bank
dividend yields exceeding both bond yields and
non-bank yields in most markets, and this spread
has widened. While higher US rates could see the
return of volatility for yield stocks, the ‘taper
tantrum’ of mid-2013 highlighted that high
dividend yield stocks still outperformed low
yielding stocks during this period.
EPS growth risks but offsets from banks managing asset growth and capital clarity
Regulatory forces have seen banks de-lever
globally, but EU/US stress tests suggest capital
builds are nearly done and Asian banks are
already above global peers. Asset quality shocks
are a risk to dividends via EPS downgrades and
increases in risk weighted asset intensity (i.e.
“RWA migration”), but we believe investors often
underestimate the cushioning impact to dividend
volatility that: 1) lower volumes would likely have
in such a scenario and 2) banks have via
managing targeted RWA run-off.
Our dividend yield scorecard: HSBC and ABC screen best
We screen the top/bottom 30 yielding stocks in
our Asia Pacific Banks coverage universe for other
metrics including:
Forecast EPS growth (EPS growth is a cushion
for dividend growth)
FX volatility vs USD (lower is better)
Payout ratios (lower is better)
Dividend volatility (lower is better)
Dividend yield spread versus bond yields
(banks more attractive versus bonds)
While we have not included capital as part of the
screen due to differing capital requirements, in
general this appears to be a subsiding risk for
bank dividend payments. Stocks with a high
dividend yield that screen best on our scorecard
metrics and that we rate Buy: HSBC and
Agricultural Bank of China (H). Stocks that screen
poorly (low dividend yield, low EPS growth, etc.)
and that we rate Sell: Punjab National Bank, Bank
of Baroda, and Bank of East Asia.
RELATED RESEARCH
HSBC: A new phase: moving towards higher capital return;
reiterate Buy, August 8, 2016
India Financial Services: Credit cycle at inflection point,
August 3, 2016
Europe: Banks: Stress Test: Worst fears avoided; capital
divergence widens, July 31, 2016
Australia: Portfolio Strategy Research: Divided on
Dividends, July 27, 2016
Europe: Banks: Receding regulatory risk as EU Council
weighs in on Basel-4 debate, July 13, 2016
China: Banks: Southbound Connect: What & Why; Bank
shares are benefiting, July 5, 2016
Australia: Banks: Commentary: APRA notes improvement in
major banks' capital ratios, July 4, 2016
United States: Banks: Stress Test 2016, June 24, 2016
Ben Koo +65-6889-2483 [email protected] Goldman Sachs (Singapore) Pte Goldman Sachs does and seeks to do business with companies
covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.
Andrew Lyons +61(2)9321-8543 [email protected] Goldman Sachs Australia Pty Ltd Sania Ruziqa +65-6654-5440 [email protected] Goldman Sachs (Singapore) Pte
Gurpreet Singh Sahi, CFA +852-2978-1287 [email protected] Goldman Sachs (Asia) L.L.C.
The Goldman Sachs Group, Inc. Global Investment Research
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 2
Table of contents
Introducing our dividend yield scorecard: Top/Bottom 30 yielding stocks 3
Why the chase for yield is unlikely to go away 5
High yield bank stocks have historically behaved more defensively when US rates surprise 6
Bank stocks have fallen behind non-banks in the chase for yield 7
Dividend risks: More cushioning than meets the eye? 10
HSBC and ABC (H) top our yield screen among Buy-rated names; PNB is at the bottom of our Sell-rated yield names 15
Company snapshots 16
HSBC Holdings (0005.HK): A new phase of higher capital returns; reiterate Buy 17
ABC (1288.HK): Highest div yield & implied NPL ratio among China banks; reiterate Buy 19
Punjab National Bank (PNBK.BO): Profitability to remain under pressure; maintain Sell 21
Appendix: Dividend yield score card charts 24
Disclosure Appendix 31
Prices in this report are as of August 10, 2016, unless stated otherwise.
Asia Financials Research Team
Name Tel E-mail Location Name Tel E-mail LocationRegional JapanAndrew Lyons 612-9321-8543 [email protected] Sydney Katsunori Tanaka 813-6437-9973 [email protected] TokyoBen Koo 65 6889 2483 [email protected] Singapore Taichi Noda 813-6437-9834 [email protected] TokyoAchsania Ruziqa 65-6654-5440 [email protected] Singapore Masayuki Takii 813-6437-9931 [email protected] TokyoChina Taiki Okada 813-6437-9917 [email protected] TokyoNan Li 86-10-6627-3021 [email protected] Beijing Masatomo Okawa 65-6654-5430 [email protected] TokyoJessica Wu 86-10-6627-3487 [email protected] Beijing ASEANShuo Yang 86-10-6627-3463 [email protected] Beijing Ben Koo 65 6889 2483 [email protected] SingaporeLucy Li 65-6654-5426 [email protected] Singapore Melissa Kuang, CFA 65-6889-2869 [email protected] SingaporeWendy Chen 65-6654-5218 [email protected] Singapore Nicholas Umar 65-6889-2492 [email protected] SingaporeKatherine Liu 65-6654-5419 [email protected] Singapore Max Jelatianranat 65-6654-5540 [email protected] SingaporeHong Kong / Exchanges IndiaGurpreet Singh Sahi, CFA 852-2978-1287 [email protected] Hong Kong Rahul Jain 91-22-6616-9161 [email protected] MumbaiMancy Sun 852-2978-6072 [email protected] Hong Kong Mayank Bukrediwala 91-22-6616-9169 [email protected] MumbaiThomas Wang 852-2978-1697 [email protected] Hong Kong Himank Jain 91-80-6637-8178 [email protected] BengaluruJonathan Lim 852-2978-0037 [email protected] Hong KongTianbo Yu 65-6654-4590 [email protected] Singapore TaiwanAustralia Vincent Chang 886-2-2730-4182 [email protected] TaipeiAndrew Lyons 612-9321-8543 [email protected] Sydney Jerry Lin 65-6654-5887 [email protected] SingaporeAshley Dalziell 612-9321-8999 [email protected] Sydney KoreaIngrid Groer 612-9321-8563 [email protected] Sydney Seung Kyu Shim 822-3788-1778 [email protected] SeoulYuChuan Leong 612-9321-8533 [email protected] Sydney Kim Hayeon 822-3788-1704 [email protected] Seoul
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 3
Introducing our dividend yield scorecard: Top/Bottom 30 yielding stocks
In addition to dividend yields, we screen the Top 30 yielding stocks in our Asia Banks coverage (92 stocks) for other favorable metrics
including EPS growth (higher EPSg supports future DPSg), FX volatility (lower volatility vs USD is preferable), payout ratio (lower
payouts provide flexibility/cushioning), dividend volatility (lower implies more predictable earnings streams) and dividend yield vs
bond yield (higher is more attractive vs holding a bond for retail investors). Further details on our scorecard metrics are provided in
the Appendix.
Buy-rated names among those stocks that screen best on our scorecard metrics are HSBC and Agricultural Bank of China (H).
Exhibit 1: Top 30 dividend yield stocks (sorted by average score)
Notes: *Denotes stock is on our regional Conviction List. Further details on our scorecard metrics are provided in the Appendix.
Source: Bloomberg, Goldman Sachs Global Investment Research.
8/10/2016
Top 30 Dividend Yield Stocks (sorted by avg score)
Rank Company Country RatingPrice
10-Aug-2016Div YieldFY17E
FY15-18 EPSg1=high, 4=low
FX Volatility1=low, 4=high
Payout Ratio1=low, 4=high
Div - Bond Yield1=high, 4=low
Dividend growth Volatility, 1=low, 4 =
HighAverage Score
1 Chongqing Rural Commercial Bank China Neutral HK$ 4.25 4.7% 1 1 1 3 3 1.82 HSBC Holdings Hong Kong Buy HK$ 54.75 7.2% 2 1 4 1 2 2.03 Bank of Chongqing China Neutral HK$ 5.98 5.5% 1 1 2 2 4 2.04 China Merchants Bank (H) China Neutral HK$ 17.5 5.2% 2 1 2 2 3 2.05 Agricultural Bank of China (H) China Buy HK$ 2.97 6.5% 4 1 3 1 2 2.26 Mega Financial Holdings Taiwan Neutral NT$ 25.9 6.2% 2 1 4 1 3 2.27 China CITIC Bank (H) China Buy* HK$ 5.04 5.5% 2 1 2 2 4 2.28 Krung Thai Bank Thailand Neutral Bt 18.1 5.5% 2 2 4 1 2 2.29 Bank of China (H) China Neutral HK$ 3.3 6.1% 4 1 3 1 3 2.410 Bank of Communications (H) China Neutral HK$ 5.53 5.8% 3 1 3 2 3 2.411 Hang Seng Bank Hong Kong Neutral HK$ 134.6 5.6% 4 1 4 1 2 2.412 China Construction Bank (A) China Buy Rmb 5.11 5.2% 3 1 3 2 3 2.413 Agricultural Bank of China (A) China Neutral Rmb 3.14 5.2% 4 1 3 2 2 2.414 Bank of China (A) China Sell Rmb 3.35 5.1% 3 1 3 2 3 2.415 Bank of Communications (A) China Neutral Rmb 5.65 4.9% 3 1 3 2 3 2.416 Sumitomo Mitsui Financial Group Japan Buy* ¥ 3399 4.7% 3 4 2 1 2 2.417 Woori Bank South Korea Sell W 10350 4.6% 3 3 3 2 1 2.418 Bank of Queensland Ltd. Australia Neutral A$ 10.7 7.1% 3 4 4 1 1 2.619 Westpac Banking Corp. Australia Neutral A$ 30.81 6.1% 3 4 4 1 1 2.620 ICBC (H) China Buy HK$ 4.64 5.8% 3 1 3 2 4 2.621 Commonwealth Bank of Australia Australia Neutral A$ 77.4 5.4% 3 4 4 1 1 2.622 ICBC (A) China Buy Rmb 4.38 5.3% 3 1 3 2 4 2.623 Industrial Bank of Korea South Korea Neutral W 11700 4.6% 2 3 2 2 4 2.624 National Australia Bank Australia Neutral A$ 26.83 6.7% 4 4 4 1 1 2.825 ANZ Banking Group Australia Buy* A$ 26.75 6.0% 4 4 4 1 1 2.826 Bendigo and Adelaide Bank Ltd. Australia Sell A$ 10.57 5.9% 4 4 4 1 1 2.827 China Construction Bank (H) China Buy HK$ 5.54 5.6% 4 1 3 2 4 2.828 Aozora Bank Japan Buy ¥ 349 5.4% 1 4 4 1 4 2.829 CIMB Group Holdings Malaysia Buy RM 4.49 4.9% 1 4 4 3 3 3.030 Malayan Banking Bhd Malaysia Neutral RM 7.95 6.8% 2 4 4 2 4 3.2
Top 10 Dividend Yield 2017E
1 2 3 4 5
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 4
Conversely, low dividend yield stocks in our coverage universe with low EPS growth, high FX volatility, high payout ratios, high
dividend volatility and low yields versus bonds look less appealing for investors.
Sell-rated names in our Bottom 30 dividend yield stock list which screen least favorably on our scorecard metrics are Punjab
National Bank, Bank of Baroda, and Bank of East Asia.
Exhibit 2: Bottom 30 dividend yield stocks (sorted by average score)
Notes: *Denotes stock is on our regional Conviction List. Further details on our scorecard metrics are provided in the Appendix.
Source: Bloomberg, Goldman Sachs Global Investment Research.
Bottom 30 Dividend Yield
Rank Company Country RatingPrice
10-Aug-2016Div YieldFY17E
FY15-18 EPSg1=high, 4=low
FX Volatility1=low, 4=high
Payout Ratio1=low, 4=high
Div - Bond Yield1=high, 4=low
Dividend growth Volatility, 1=low, 4 =
HighAverage Score
1 Punjab National Bank India Sell Rs 119.75 0.0% 4 3 1 4 3 3.02 Chang Hwa Commercial Bank Taiwan Neutral NT$ 16.5 2.6% 4 1 3 3 4 3.03 Bank Mandiri Indonesia Neutral Rp 11550 2.6% 1 3 3 4 4 3.04 KB Financial Group South Korea Buy W 37900 2.9% 3 3 2 3 4 3.05 Shinsei Bank Japan Buy ¥ 154 0.6% 4 4 1 3 2 2.86 Bank of Baroda India Sell Rs 160.3 1.9% 2 3 2 4 3 2.87 ICICI Bank India Neutral Rs 239.3 1.9% 3 3 2 4 2 2.88 Bank of East Asia Hong Kong Sell HK$ 32.95 1.9% 3 1 4 3 3 2.89 Dah Sing Banking Group Hong Kong Neutral HK$ 14.96 2.1% 4 1 2 3 3 2.610 BNK Financial Group South Korea Neutral W 8910 2.2% 4 3 1 3 2 2.611 CTBC Financial Holdings Taiwan Neutral NT$ 18 2.4% 4 1 2 3 3 2.612 Suruga Bank Japan Sell ¥ 2344 0.4% 2 4 1 3 2 2.413 State Bank of India India Buy Rs 231.5 1.1% 2 3 1 4 2 2.414 BDO Unibank Philippines Neutral P 119.5 1.9% 1 2 2 4 3 2.415 Bank Tabungan Negara Indonesia Neutral Rp 1945 2.4% 1 3 1 4 3 2.416 Hana Financial Group South Korea Neutral W 29050 2.5% 1 3 1 3 4 2.417 Shizuoka Bank Japan Sell ¥ 788 2.5% 3 4 2 2 1 2.418 Chiba Bank Japan Neutral ¥ 562 2.7% 4 4 1 2 1 2.419 Bank Rakyat Indonesia Indonesia Neutral Rp 12000 2.9% 1 3 2 4 2 2.420 Kotak Mahindra Bank India Neutral Rs 760.7 0.1% 1 3 1 4 2 2.221 Yes Bank India Buy* Rs 1264.8 1.1% 1 3 1 4 2 2.222 Ping An Bank Co. China Neutral Rmb 9.14 1.9% 1 1 1 4 4 2.223 E.Sun Financial Holding Taiwan Neutral NT$ 18.1 2.3% 2 1 2 3 3 2.224 Bank Of Nanjing China Neutral Rmb 10.32 2.7% 1 1 1 4 4 2.225 IndusInd Bank India Neutral Rs 1158.5 0.7% 1 3 1 4 1 2.026 Axis Bank India Buy Rs 567.05 0.9% 1 3 1 4 1 2.027 HDFC Bank India Buy Rs 1229.45 1.0% 1 3 1 4 1 2.028 Metropolitan Bank and Trust Co Philippines Neutral P 93.35 1.1% 1 2 1 4 2 2.029 Bank Central Asia Indonesia Neutral Rp 14950 1.4% 1 3 1 4 1 2.030 Kasikornbank Thailand Neutral Bt 200 2.8% 1 2 2 3 1 1.8
Bottom 10 Div Yield FY17E
1 2 3 4 5
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 5
Why the chase for yield is unlikely to go away
Bond yields have been on a downward march over the past decade and after adjusting for inflation are now flat/negative across
most of developed Asia (Exhibits 3 and 4). Additionally, some DM countries in Asia have seen higher FX volatility over the period.
Falling yields is now leading to a return of interest in dividend funds.
Exhibit 3: 10-year bond yields have compressed over the past decade
Exhibit 4: Real bond yields are currently flat/negative in developed Asia (ex-
Singapore)
Source: Bloomberg
Source: Bloomberg, Goldman Sachs Global Investment Research.
Exhibit 5: FX volatility has been high, particularly in some DM countries Exhibit 6: Interest in dividend funds has risen in recent months
Note: Data based on average monthly change from July 2011-July 2016.
Source: Bloomberg
Source: EPFR
(1)
-
1
2
3
4
5
6
7
Mar
-07
Sep-
07
Mar
-08
Sep-
08
Mar
-09
Sep-
09
Mar
-10
Sep-
10
Mar
-11
Sep-
11
Mar
-12
Sep-
12
Mar
-13
Sep-
13
Mar
-14
Sep-
14
Mar
-15
Sep-
15
Mar
-16
Australia Hong Kong Japan South Korea Singapore
10Y Bond Yield (%)
(2) (1)
- 1 2 3 4 5 6 7 8
Indi
a
Indo
nesi
a
Phili
ppin
es
Mal
aysi
a
Chi
na
Thai
land
Aus
tral
ia
Sing
apor
e
Sout
h K
orea
Hon
g K
ong
Taiw
an
Japa
n
10yr Bond 10yr Bond less Infl. Exp.
(%)EM Asia still positive real yields
DM Asia flat/negative real yields (ex-Sing)
2.8 2.72.6
2.42.3 2.2
1.5 1.4 1.41.2
0.7
0.1 -
0.5
1.0
1.5
2.0
2.5
3.0
Japa
n
Aus
tral
ia
Mal
aysi
a
Indo
nesi
a
Indi
a
Sou
th K
orea
Thai
land
Sin
gapo
re
Phi
lippi
nes
Taiw
an
Chi
na
Hon
g K
ong
Std Dev of monthly change in FX vs USD (%)
-6
-5
-4
-3
-2
-1
0
1
2
Jul-15 Oct-15 Jan-16 Apr-16 Jul-16
Dividend Funds Inflows/Outflows (US$bn)
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 6
High yield bank stocks have historically behaved more defensively when US rates surprise
During mid-2013, the “taper-tantrum” saw most bank stocks globally sold off aggressively. Despite this sell-off, a portfolio of the
Top 30 high yield stocks in FY12 would have outperformed the Bottom 30 yielding stocks, i.e. yield stocks were more defensive.
Exhibit 7: The Top 30 dividend yield stocks outperformed the Bottom 30 yielding stocks through the mid-2013 “taper-tantrum”
Performance of the Top 30 and Bottom 30 dividend yield stocks in the Asia Financials sector in FY12
Source: Datastream, Company data.
80
85
90
95
100
105
110
115
Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14
30 Highest Dividend Yield stocks 30 Lowest Dividend Yield Stocks
100 = Dec 2012
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 7
Bank stocks have fallen behind non-banks in the chase for yield
Despite the fall in bond yields over the past one year, bank dividend yields have failed to keep pace with the degree of compression.
As such, bank dividend yield spreads versus bond yields have widened, particularly in developed Asia (Exhibits 8 and 9). Compared
to local market indexes, bank yields are also now above the average dividend yield of the local indexes for nearly all countries in
Asia and this premium has widened on average across Asia over the past two years (Exhibits 10 and 11).
Exhibit 8: Own a bank stock or own a bond? DM bank yields look more
attractive
Exhibit 9: EM bank dividend yields show a mixed story
Source: Bloomberg, Goldman Sachs Global Investment Research.
Source: Bloomberg, Goldman Sachs Global Investment Research.
Exhibit 10: DM bank yields are now above their local market index
Exhibit 11: EM banks are now also mostly above the local market index
Source: Bloomberg, Goldman Sachs Global Investment Research.
Source: Bloomberg, Goldman Sachs Global Investment Research.
Japan
KoreaSingapore
TaiwanAustralia
HongKong
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Dividend Yield - 10 YR Bond yield: Developed Asia
China
IndiaIndonesia
Malaysia
Thailand
Philippines
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Dividend Yield - 10YR Bond Yield: Emerging Asia
Japan
Korea
Singapore
Taiwan
Australia
HongKong
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Banking Dividend Yield vs Local Index Yield (Developed Asia)
China
India
Indonesia
Malaysia
Thailand
Philippines
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Banking Dividend Yield vs Local Index Yield :Emerging Asia
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 8
Compared to other typical yield stocks, banks also now look more attractive versus history
Yield investors typically compare banks to telcos and REITs. Compared to telcos, banking sector dividend yields are now higher
than those on offer in the telco sector for China, Australia, Indonesia, Japan, Korea, India and Malaysia (Exhibit 12) and this
premium has widened versus the average of the past three years.
Compared to REITS, banking sector dividend yields are higher in Korea and Australia (Exhibit 13) and in most countries this yield
differential has improved in favor of banks versus the average of the past three years. In Australia, the presence of franking credits
for bank dividends (i.e. corporate tax already paid), but not REITS, makes this differential even more stark.
Exhibit 12: Bank yield spreads have improved versus telcos in all countries
Bank versus telco dividend yield – FY16E vs 3-year historic average (%)
Exhibit 13: Bank yield spreads have also improved versus REITs in most cases
Bank dividend yield versus REIT yield – FY16E vs 3-year historic average (%)
Source: Bloomberg, Goldman Sachs Global Investment Research.
Source: Bloomberg, Goldman Sachs Global Investment Research.
Relative to the rest of the world, Asia capital returns are still low when including buy-backs
Dividends provide income for investors, while buy-backs aide future EPS growth. While some markets in Asia appear to have very
high dividend payout ratios, our Portfolio Strategy team recently highlighted in their note “Divided on Dividends” (July 27, 2016)
that when including buy-backs markets like the US are returning significantly more cash than high dividend payout markets like
Australia (see Exhibit 14). Overall, the effective payout ratios (including buy-backs) in Asia are still well below the levels seen
globally and by banks (see Exhibits 15 and 16).
2.4
1.7 1.7
-0.2-0.5
0.6
-0.5
-1.1
-1.5
-3.1
-1.9
-3.4
2.52.3
1.31.0
0.5 0.4 0.2
-0.6 -0.7
-1.5 -1.5
-2.7
China Australia Indonesia Japan Korea India Malaysia HongKong Singapore Thailand Taiwan Philippines
Average FY12-15 FY16ESpread (Average Bank Yield vs Telco Yield )
-1.0
-0.3
-1.8
-2.9
-1.6
-2.9 -2.8
-1.9
-4.8-4.3
1.61.2
-0.3
-2.0 -2.2 -2.3-2.7
-3.3
-5.3-5.7
Korea Australia Japan Malaysia HongKong Thailand Singapore China Indonesia India
Average FY12-15 FY16ESpread (Average Bank Yield vs REIT Yield )
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 9
Exhibit 14: Payout ratios of Australian firms don’t look that bad when compared to the global market Dividends and buy-back as % of FCF for major equity markets
Source: Bloomberg, FactSet, Goldman Sachs Global Investment Research
Exhibit 15: Capital returns in Asia are generally at the low end versus the
global market Dividend and buy-back as % of FCF for MSCI All Country Index, FY15
Exhibit 16: Bank capital returns in Asia are relatively lower than non-banks Dividend and buy-back as % of FCF for bank and non-banks in the MSCI All
Country Index, FY15
Source: Bloomberg, MSCI
Source: Bloomberg, MSCI
85 83
7369 68 67
4944 43 42
3023
0
10
20
30
40
50
60
70
80
90
Cap
ital
man
agem
ent
as %
of
FCF
In FY15 ASX 200 firms paid-out 73% of FCF via dividends...
6761
42 4235
20 18 1713 13 11
60
10
20
30
40
50
60
70
80 ...But only 11% via Buy-Backs...
68
8569
44
8373 67
4942
30 23
49
67 35
42
61
13
116
1320
1817
43
135
120
111104
96
83
73
62 62
4840
92
0
20
40
60
80
100
120
140
160 ...In aggregate Australian Firms returned less cash than the global
average
Buy-Back as % of FCF
Dividends % of FCF
75 8065
55 60 57 53
3252 48
3038
12 3
9 1 1 5
241
18 3
8883
65 64 61 58 58 56 52 49 4841
Australia Malaysia India Singapore Philippines Indonesia HongKong
Korea Thailand Taiwan Japan China
Dividends % of FCF Buy-Back as % of FCF
58%
86%
32%
30% 46
%
115%
40% 56
%
39% 49
%
28%
76%
34%
63%
31% 49
%
29%
72%
30%
32%
26%
93%
26%
91%
67
101
4748
47
122
41
61
4050
39
84
34
64
31
57
30
72
30
59
26
93
26
93Ba
nkNo
n Ba
nk
Bank
Non
Bank
Bank
Non
Bank
Bank
Non
Bank
Bank
Non
Bank
Bank
Non
Bank
Bank
Non
Bank
Bank
Non
Bank
Bank
Non
Bank
Bank
Non
Bank
Bank
Non
Bank
Bank
Non
Bank
AUS JPN MYS HKG TWN SGP THA CHN PHL KOR IND IDN
Dividends % of FCF Buy-Back as % of FCF
Note: Bubble Represents Total Payout Ratio
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 10
Dividend risks: More cushioning than meets the eye?
Bank dividends are dependent on three factors: earnings/profits, capital requirements and asset growth. While earnings risks have
been top of investor minds given macro uncertainties, managing asset growth should help banks accumulate capital faster and
therefore facilitate higher payout ratios. The chase for higher capital ratios globally also seems to be subsiding and current reported
capital ratios of the Asia banks are already high by global standards.
Some cushioning against earnings risks despite decline in profitability
Profitability has been declining in most Asian banking markets over the past five years as a slowdown in global growth has created
revenue pressures, particularly for DM banks, and asset quality issues, particularly for EM banks (see Exhibits 17 and 18). While
recent bank results have shown signs of stabilization/improvement in asset quality in some EM bank markets (e.g. Indonesia and
Thailand), investors are likely to remain concerned about earnings risks in some DM banks given lower rates and growth.
Exhibit 17: DM Asia bank ROAs have generally declined due to revenue
pressures…
Exhibit 18: …while EM Asia bank ROAs have largely been impacted due to
asset quality pressures
Source: Company data, Goldman Sachs Global Investment Research.
Source: Company data, Goldman Sachs Global Investment Research.
That said, our forecasts already factor in a higher level of credit costs / pre-provision profits for most banking markets we cover, with
Korean and Philippine banks the exception (see Exhibit 19). Additionally, while the payout ratio for Australian banks in FY17E is
already high, credit costs / pre-provision profits still looks low, thus providing some earnings buffers for higher credit costs but less
flexibility for maintaining dividends (see Exhibit 20).
Japan
Korea
Singapore
TaiwanAustralia
HongKong
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2010 2011 2012 2013 2014 2015 2016E
Japan Korea Singapore Taiwan Australia HongKong
ROA in Developed Asia
China
India
Indonesia
Malaysia
Thailand
Philippines
0.5
1.0
1.5
2.0
2.5
3.0
2010 2011 2012 2013 2014 2015 2016E
China India Indonesia Malaysia Thailand Philippines
ROA in Emerging Asia
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 11
Exhibit 19: We factor in higher credit cost / PPOP for most of our Asia banks
coverage, and DM banks are generally low on this ratio
Exhibit 20: Australian banks are relatively low on credit costs / PPOP, but the
payout ratio is high, suggesting less dividend cushioning for any rise in credit
costs
Source: Company data, Goldman Sachs Global Investment Research.
Source: Goldman Sachs Global Investment Research.
Earnings hits could be absorbed by higher payouts; RWA migration the bigger risk
Under a 10% earnings hit scenario, we estimate that dividends can be maintained via payout ratios increasing between 3%-9%, with
only a small reduction to CET1 ratios (by 11bps in our example for a 10% ROE bank). The bigger unknown is downgrades to loan
books which in turn could result in an increase in risk weighted assets (i.e. “RWA migration”). Based on our analysis, a 10%
earnings hit with a 1% increase in RWAs would cause the CET1 ratio to fall 22bps, so 2x the impact of just looking at profits. Banks
typically manage RWA migration in bad times by shedding low margin business, asset sales and withdrawing undrawn credit lines
(e.g. HSBC’s announced reduction of US$48bn of RWAs in 1H16), but this tends to be difficult when there are rapid changes to asset
quality as was the case at the start of the global financial crisis (GFC).
Exhibit 21: Scenario analysis to maintain dividends
Source: Goldman Sachs Global Investment Research.
0
5
10
15
20
25
30
35
40
45
50
IND KOR CHN THA IDN SGP MYS TWN PHL AUS JPN HKG
Avg FY12-15 Avg FY16E-17E
Credit Cost to PPOP across Banks
IND
KORCHN
THA
IDN
SGP
MYS
TWN
PHL
AUS
JPN
HKG
15%
25%
35%
45%
55%
65%
75%
85%
5 10 15 20 25 30 35 40 45 50
FY17E Payout Ratio (%)
FY17E Credit Cost to PPOP (%)
30% 40% 50% 60% 70% 80%
-10% earnings hit scenarioNew payout 33% 44% 56% 67% 78% 89%Payout increase 3% 4% 6% 7% 8% 9%CET1 change (assuming 0% RWA migration) -0.11% -0.11% -0.11% -0.11% -0.11% -0.11%CET1 change (assuming 1% RWA migration) -0.22% -0.22% -0.22% -0.22% -0.22% -0.22%
Initial Payout Ratio
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 12
Capital ratio and leverage pressures starting to subside
Bank leverage has declined across Asia over the past decade (see Exhibits 22 and 23). Global banks in the US and Europe have also
significantly de-levered over the same period and pressure to build capital levels from here appears to be easing given:
EU finance ministers issued a statement saying that the completion of Basel reforms should not result in a meaningful increase
in capital (see “Europe: Banks: Receding regulatory risk as EU Council weighs in on Basel-4 debate”, July 12, 2016).
The recent EU bank stress tests yielded no new surprises, although further capital builds are required in some G-SIB institutions
(see “Europe: Banks: Stress Test: Worst fears avoided; capital divergence widens”, July 31, 2016).
US stress tests were successfully passed by all banks for a second year in a row, which our US banks team believes should
facilitate higher capital returns (see “United States: Banks: Stress Test 2016”, June 24, 2016).
As such, while uncertainty around global capital levels has been a headwind for many Asian banks, particularly DM Asia, overall we
would expect this pressure to ease. However, for some banking markets like Australia, the local banking regulators may choose to
remain more conservative than global standards and thus capital clarity remains an overhang in these markets (see “Australia:
Banks: Commentary: APRA notes improvement in major banks' capital ratios”, July 4, 2016).
Exhibit 22: Bank leverage in DM Asia has declined
Exhibit 23: EM Asia bank leverage generally remains lower than DM
Source: Company data, Goldman Sachs Global Investment Research.
Source: Company data, Goldman Sachs Global Investment Research.
Japan
Korea
Singapore
Taiwan
Australia
HongKong
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Leverage in Developed Asia
ChinaIndia
Indonesia
Malaysia
ThailandPhilippines
-
5.0
10.0
15.0
20.0
25.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Leverage in Emerging Asia
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 13
Exhibit 24: CET1 capital ratios across Asia banks have improved Exhibit 25: Asia banks look well positioned versus global peers
Note: Korea, Taiwan and India FY10 data refers to 2013.
Source: Company data, Central Bank of the Republic of China (Taiwan) (CBC)
Source: Company data, European Banking Authority, CBC.
The slower growth paradox: Better for dividends than you might think
While rapid changes to growth present a risk to profitability and asset quality, more gradual slowdowns in growth are much more
manageable by banks and also facilitate higher payout ratios. Slow loan growth reduces the capital needs of a bank and therefore
allows banks to increase their payout ratio, even for lower levels of profitability.
Below we provide a scenario analysis for a hypothetical bank with a 10% ROE, 5% asset growth, with a target 10% CET1 ratio which
can sustain a 50% payout ratio. In this example we show that a permanent 10% reduction in profitability would reduce the
sustainable payout ratio to 44%, but if this was coupled with a 2% reduction in asset growth it would instead facilitate a 67% payout
ratio (see Exhibit 26).
1311 11
13 13 128
10 10 10 97
18
14 14 13 13 13 12 11 10 10 10 10
Indo
nesi
a
Hon
gKon
g
Thai
land
Phili
ppin
es
Sing
apor
e
Indi
a
Japa
n
Mal
aysi
a
Chi
na
Kor
ea
Taiw
an
Aus
tral
ia
FY10 Latest Reported
Bubble represents Latest Reported CET1 Ratio
CET 1 Ratio (%)
18 17
14 14 14 13 13 13 13 13 13 12 12 12 12 11 11 10 10 10 10
Indo
nesi
a
Nor
dic
Hon
gKon
g
Thai
land
Ben
elux
Ger
man
y
Phili
ppin
es
Sing
apor
e
Indi
a
UK
Fran
ce
US
Larg
e C
apB
anks Ire
land
Aus
tria
& C
EE
Japa
n
Italy
Mal
aysi
a
Spai
n
Chi
na
Kor
ea
Taiw
an
Bubble represents Latest Reported CET1 Ratio
CET 1 Ratio (%)
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 14
Exhibit 26: Sustainable bank payout ratios are sensitive to asset growth Sustainable payout ratio scenarios for asset growth and profitability changes
(assuming initial bank with 10% ROE, 5% asset growth, target CET1 of 10%)
Source: Goldman Sachs Global Investment Research.
Exhibit 27: Payout ratios of banks have changed more in EM than DM Asia…
Exhibit 28: …but we expect less variability in payout ratios
Source: Company data, Goldman Sachs Global Investment Research.
Source: Company data, Goldman Sachs Global Investment Research.
-2% -1% 0% 1% 2%-10% 67% 56% 44% 33% 22%
-5% 68% 58% 47% 37% 26%
0% 70% 60% 50% 40% 30%
5% 71% 62% 52% 43% 33%
10% 73% 64% 55% 45% 36%
Asset growth change vs base case
Cha
nge
to p
rofit
s
17%14%
9%
3%1% 1% 1%
0%-2% -3%
-7%
-11%
Dividend Payout Ratio Change over the years (FY12-FY15)
5%3% 3% 2%
1%
0% 0% -1% -1% -1%-4% -4%
Dividend Payout Ratio Change over the years (FY15-FY18E)
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 15
HSBC and ABC (H) top our yield screen among Buy-rated names; PNB is at the bottom of
our Sell-rated yield names
Based on our analysis of all the Asian banks under coverage (92 stocks), we identify:
11 banks that look attractive given their high 2017E dividend yield, and are Buy-rated. Among the banks that screen well are
ANZ, CITIC (H) and SMFG (all Buy-rated and on our regional Conviction List), while Buy-rated HSBC, ABC (H), CCB (A), CCB (H),
ICBC (H), ICBC (A), Aozora and CIMB also look attractive (see Exhibit 1 for full list of the Top 30 dividend yield stocks and
associated average score based on our scorecard metrics).
5 banks with the lowest 2017E dividend yield and that are Sell-rated, namely: PNB, Bank of Baroda, Bank of East Asia, Suruga
Bank and Shizuoka Bank (see Exhibit 2 for a full list of the Bottom 30 dividend yield stocks and associated average score based
on our scorecard metrics).
Exhibit 29: Investment Ideas (Buy and Sell) in our Top and Bottom 30 dividend yield stock screen for 2017E
Source: DataStream, Goldman Sachs Global Investment Research.
Our Buy Rated Names in Top 30 Dividend Yield Stock in 2017E
Target Price Potential P/B (X) P/E (X) EPS BVPS
Name Rating Currency Price 10-Aug-2016 % Upside 2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017EEquity/ assets
Equity/ RWA
NPL ratio PCRNon-int
inc./op.revCost/
incomeROA ROE L/D Ratio
HSBC Holdings Buy HK$ 60.0 54.8 9.59 0.8 0.8 15.4 10.7 3.6 5.1 67.9 68.1 4.0 5.1 6.6 16.6 na na 41.7 61.5 0.4 5.2 naAgricultural Bank of China (H) Buy HK$ 3.48 2.97 17.05 0.8 0.7 5.6 5.6 0.5 0.5 3.8 4.2 0.2 0.5 6.4 10.3 2.7 166.1 20.0 41.5 0.9 14.5 67.1China CITIC Bank (H) Buy* HK$ 5.83 5.04 15.67 0.7 0.6 5.7 5.3 0.9 0.9 7.2 7.9 0.2 0.9 6.3 9.2 1.6 158.7 29.6 35.5 0.8 12.9 79.8China Construction Bank (A) Buy Rmb 5.70 5.11 11.55 0.8 0.7 5.8 5.7 0.9 0.9 6.3 6.9 0.3 0.9 7.8 13.3 1.9 128.2 23.0 32.8 1.1 14.8 77.5Sumitomo Mitsui Financial Group Buy* ¥ 5,260.00 3,399.00 54.75 0.5 0.5 6.3 6.2 543.8 552.6 6,683.2 7,076.7 160.0 552.6 4.7 14.7 1.4 55.7 52.3 59.3 0.4 8.2 85.1ICBC (H) Buy HK$ 5.05 4.64 8.76 0.9 0.8 6.2 6.0 0.7 0.8 5.3 5.8 0.2 0.8 7.8 13.1 1.7 140.8 25.5 32.8 1.2 14.8 73.8ICBC (A) Buy Rmb 4.90 4.4 11.87 0.8 0.7 5.8 5.7 0.7 0.8 5.3 5.8 0.2 0.8 7.8 13.1 1.7 140.8 25.5 32.8 1.2 14.8 73.8ANZ Banking Group Buy* A$ 30.71 26.8 14.79 1.4 1.3 13.2 11.6 2.0 2.3 19.8 20.8 1.6 2.3 6.3 13.9 1.0 71.4 27.2 49.0 0.7 10.8 110.5China Construction Bank (H) Buy HK$ 5.94 5.7 5.01 0.7 0.7 5.2 5.1 1.1 1.1 7.7 8.5 0.3 1.1 7.8 13.3 1.9 128.2 23.0 32.8 1.4 18.2 77.5Aozora Bank Buy ¥ 540.0 349.0 54.73 1.0 0.9 9.3 9.1 37.5 38.5 365.6 384.8 18.7 38.5 8.3 12.2 1.6 153.1 43.5 46.1 0.9 10.5 100.7CIMB Group Holdings Buy RM 5.40 4.60 17.39 0.9 0.9 10.6 8.8 0.4 0.5 4.9 5.2 0.2 0.5 8.6 25.6 2.8 93.4 37.4 56.4 0.8 9.0 93.1Our Sell names in Bottom 30 Dividend Yield Stock in 2017EPunjab National Bank Sell Rs 86 119.8 (28.18) 0.6 0.6 -88.1 43.8 -1.4 2.7 185.8 189.1 0.0 2.7 5.5 8.6 11.1 46.8 38.9 48.6 0.0 -0.7 75.7Bank of Baroda Sell Rs 142 160.3 (11.42) 1.0 0.9 13.0 9.4 12.4 17.1 165.7 177.9 3.0 17.1 5.8 10.0 8.8 61.5 35.3 49.8 0.4 6.7 70.8Bank of East Asia Sell HK$ 23 33.0 (30.20) 1.1 1.1 25.1 22.7 1.3 1.5 29.9 30.7 0.6 1.5 9.9 14.8 1.6 45.0 30.6 58.9 0.4 4.4 80.9Suruga Bank Sell ¥ 1,940 2,344.0 (17.24) 1.7 1.5 14.2 13.8 164.5 170.3 1,419.7 1,579.5 10.5 170.3 7.3 14.6 2.5 29.2 -0.4 44.3 0.9 12.1 85.0Shizuoka Bank Sell ¥ 800 788.0 1.52 0.5 0.5 9.9 9.6 79.3 82.1 1,563.2 1,629.7 20.0 82.1 8.3 19.0 3.2 20.1 24.2 54.0 0.4 5.2 83.5
2016E CAMEL ratios (%)DPS
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 16
Company snapshots
Company snapshots
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 17
HSBC Holdings (0005.HK): A new phase of higher capital returns; reiterate Buy
Source of opportunity
Since 2008 HSBC has been in capital build mode, in the beginning to fill the capital hole in the Household
division, and later to satisfy higher global regulatory capital requirements from being a GSIFI (globally
systemically important financial institution). Throughout this period levered returns were pressured by lower
leverage, on top of the negative impact that lower interest rates had on unlevered returns.
We believe that we are at the inflection point of this structural shift, with this sole focus on capital build
ending. HSBC’s announced US$2.5bn share buy-back in 2H16 should be the first step in that direction. We
believe more buy-backs could happen in future, subject to successful implementation of RWA shrinkage plans
and regulatory approval, as HSBC is now operating at the top end of the target range for CT1 CAR (12%-13%). The
likely first dividend payment (in 2017) in a decade from HSBC’s US subsidiary should help HSBC manage the cash
flow for its own dividends.
Scope for additional buy-backs, on top of an already attractive 7.2% 2017E dividend yield, should make the
dividend yield even more appealing as buy-backs effectively neutralize the dilutive effect scrip take-up for
dividends has on the share count (~2% of shares). Basel 4 implementation remains a key risk to the thesis, and
could significantly raise the existing capital requirements by inducing RWA inflation.
Catalyst
We calculate an additional c.US$5bn buy-back (~4% of mkt cap) is possible by mid-2018 if RWAs remain
flat (post the proposed Brazil sale) until YE17. However, this is not factored into our estimates as we factor in
regulatory driven RWA inflation (Basel 4). For additional details please refer to ‘HSBC: A new phase: moving
towards higher capital return; reiterate Buy’, August 8, 2016.
Valuation
We reiterate our Buy rating on HSBC with an unchanged RIM-based 12-month target price of HK$60. HSBC trades
at 0.8X 2017E P/B vs. an ROE of 7.5% and an estimated 9.6% COE.
Key risks
Higher-than-expected UK credit costs and/or capital requirements; higher operational costs in Europe.
HSBC Holdings (0005.HK) is covered by Gurpreet Singh Sahi, CFA.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy list
Coverage View: Neutral
Growth
Returns *
Multiple
Volatility Volatility
Multiple
Returns *
Growth
Investment Profile
Low High
Percentile 20th 40th 60th 80th 100th
* Returns = Return on Capital For a complete description of the investment
profile measures please refer to the
disclosure section of this document.
HSBC Holdings (0005.HK)
Asia Pacific Banks Peer Group Average
Key data Current
Price (HK$) 54.75
12 month price target (HK$) 60.00
Market cap (HK$ mn / US$ mn) 1,077,753.8 / 138,954.7
Foreign ownership (%) --
12/15 12/16E 12/17E 12/18E
EPS (HK$) New 5.05 3.56 5.11 5.74
EPS revision (%) 0.0 0.0 0.0 0.0
P/B (X) 1.0 0.8 0.8 0.8
P/E (X) 13.3 15.4 10.7 9.5
Dividend yield (%) 5.9 7.2 7.2 7.4
P/PPOP (X) 6.4 6.9 6.4 5.8
PPOP growth (%) (10.6) (6.6) 7.8 10.4
Preprovision ROA (%) 0.9 0.8 0.8 0.9
Credit cost (%) 0.4 NM NM NM
ROA (%) 0.50 0.36 0.50 0.57
ROE (%) 7.2 5.2 7.5 8.4
18,000
20,000
22,000
24,000
26,000
28,000
30,000
45
50
55
60
65
70
75
Aug-15 Nov-15 Feb-16 May-16
Price performance chart
HSBC Holdings (L) Hang Seng Index (R)
Share price performance (%) 3 month 6 month 12 month
Absolute 12.3 4.6 (21.7)
Rel. to Hang Seng Index 1.1 (10.3) (14.6)
Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 8/10/2016 close.
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 18
HSBC Holdings: Summary financialsProfit model ($ mn) 12/15 12/16E 12/17E 12/18E Balance sheet ($ mn) 12/15 12/16E 12/17E 12/18E
Net interest income 32,531.0 30,509.1 30,030.9 31,073.3 Gross loans 1,024,428.0 -- -- --
Non-interest income 25,234.0 21,863.1 22,018.7 23,185.1 NPLs 0.0 0.0 0.0 0.0
Operating revenue 57,765.0 52,372.2 52,049.6 54,258.3 Loan loss reserves 11,027.0 -- -- --
Non-interest expense (36,182.0) (32,221.6) (30,335.3) (30,291.6) Total interest earning assets 1,698,267.0 1,737,215.6 1,755,024.4 1,784,055.0
Preprovision operating profit 21,583.0 20,150.6 21,714.3 23,966.7 Other non-interest earning assets 711,389.0 865,976.7 878,859.2 899,973.6
Total provision charge (3,721.0) (3,987.7) (3,479.5) (3,581.2) Total assets 2,409,656.0 2,603,192.3 2,633,883.7 2,684,028.6
Associates 2,556.0 2,487.5 2,601.0 2,731.3 Customer deposits 1,289,586.0 1,287,214.2 1,313,264.4 1,356,727.5
Pretax profit 18,867.0 14,693.4 20,473.3 23,116.9 Total interest-bearing liabilities 1,455,608.0 1,466,456.2 1,492,506.4 1,535,969.5
Tax (3,771.0) (3,506.7) (5,130.8) (5,779.2) Total equity 197,518.0 197,084.1 201,725.3 208,407.1
Minorities 0.0 0.0 0.0 0.0
Net profit 12,572.0 9,001.4 13,071.7 15,019.8 CAMEL ratios (%) 12/15 12/16E 12/17E 12/18E
C: Tier 1 capital ratio 12.7 13.4 13.5 13.6
Dividends 0.0 0.0 0.0 0.0 C: Equity/loans 18.6 19.2 19.3 19.5
Dividends payout (%) 78.6 111.4 77.6 70.5 C: Equity/assets 7.1 6.6 6.7 6.8
A: NPL ratio 0.0 NM NM NM
Earnings growth drivers (%) 12/15 12/16E 12/17E 12/18E A: Loan loss reserves/NPLs NM NM NM NM
Net interest margin 1.84 1.78 1.72 1.76 E: Net interest margin 1.84 1.78 1.72 1.76
Provision charge/total loans 0.40 0.45 0.38 0.38 E: Non int inc/oper revenues 43.68 41.75 42.30 42.73
YoY Growth (%) E: Cost-income ratio 62.6 61.5 58.3 55.8
Customer deposits (4.5) (0.2) 2.0 3.3 E: ROAA 0.50 0.36 0.50 0.57
Loans (5.2) (3.4) 2.0 3.2 L: Loan/deposit ratio 71.7 69.4 69.3 69.3
Net interest income (6.3) (6.2) (1.6) 3.5
Fee income (7.8) (12.3) (0.2) 3.0 Loan portfolio (%) 12/15 12/16E 12/17E 12/18E
Non-interest income (7.7) (13.4) 0.7 5.3 Commercial & corporate 63.5 -- -- --
Operating revenue (6.9) (9.3) (0.6) 4.2 Mortgages/home loans 26.8 -- -- --
Operating expenses 4.5 10.9 5.9 0.1 Consumer 36.5 -- -- --
Preprovision operating profit (10.6) (6.6) 7.8 10.4
Provision charges (3.4) 7.2 (12.7) 2.9 Valuation (current price) 12/15 12/16E 12/17E 12/18E
Pretax profit 1.0 (22.1) 39.3 12.9 P/E basic (X) 13.3 15.4 10.7 9.5
Net profit (4.1) (28.4) 45.2 14.9 P/B (X) 0.99 0.81 0.81 0.80
EPS (6.2) (29.6) 43.8 12.2 P/PPOP (X) 6.4 6.9 6.4 5.8
DPS 2.0 (0.2) 0.1 2.0 Dividend yield (%) 5.9 7.2 7.2 7.4
Market dimensions 12/15 12/16E 12/17E 12/18E EPS, basic ($) 0.65 0.46 0.66 0.74
No of branches -- -- -- -- EPS, fully-diluted ($) 0.64 0.46 0.66 0.74
No of staff (000) 255.2 -- -- --
Revenues/staff (US$) 226,349.2 NM NM NM EPS, basic growth (%) (6.2) (29.4) 43.6 12.2
Net profit/staff (US$) 49,437.1 NM NM NM EPS, fully diluted growth (%) (6.4) (29.3) 43.8 12.2
BVPS (HK$) 67.96 67.93 68.09 69.05
DuPont analysis (%) 12/15 12/16E 12/17E 12/18E DPS (HK$) 3.97 3.97 3.97 4.05
ROE 7.2 5.2 7.5 8.4
x leverage 7.0 6.9 6.7 6.8
=ROA 0.50 0.36 0.50 0.57
% of assets 12/15 12/16E 12/17E 12/18E
Net interest income 1.29 1.22 1.15 1.17
Fee income 0.58 0.51 0.49 0.50
Non-interest income 1.00 0.87 0.84 0.87
Operating revenue 2.29 2.09 1.99 2.04
Operating expenses 1.43 1.29 1.16 1.14
Preprovision operating profit 0.86 0.80 0.83 0.90
Loan loss provisions 0.15 0.16 0.13 0.13
Pretax profits 0.75 0.59 0.78 0.87
Taxes 0.15 0.14 0.20 0.22
Note: Last actual year may include reported and estimated data.
Source: Company data, Goldman Sachs Research estimates.
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 19
ABC (1288.HK): Highest div yield & implied NPL ratio among China banks; reiterate Buy
Source of opportunity
Agricultural Bank of China (H) is down 6% YTD, underperforming its big China bank H-share peers by 5% YTD (on
average the big China bank H-shares are down 1% YTD). We see its valuation as attractive given its 6.5% 2017E
dividend yield vs. the peer average at 5.9% despite its ROE being comparable to ICBC and CCB. Given the
outlook for ABC (H) of high-single digit asset and profit growth, we view its internal capital generation as
sufficient to support a stable dividend payout at 30% and a tier-1 CAR at 11% during 2016E-18E. In addition,
thanks to its below-peer valuation based on P/B and above-peer provision/loan ratio (4.5% vs 2.9% peer average
at YE15), we expect implied NPAs over RWA to reach 11.4% in 2016E vs. the 9.4% average for our H-share banks
coverage or the big China bank H-share peer average of 10.1%, which could offset any investor concerns on its
slightly weaker NPL track record vs. ICBC and CCB.
Catalyst
1) Slower growth momentum in its NPLs in the upcoming 1H16 financial statement; 2) Potential beneficiary
of Southbound Connect as investors could actively purchase ABC H-shares amid their desire for dividend yields.
For additional details please refer to ‘Southbound Connect: What & Why; Bank shares are benefiting’, July 5,
2016.
Valuation
Our RIM-based 12-month target price is unchanged at HK$3.48, implying a 0.83X 2016E P/B and 17% upside
potential. The stock trades at 0.66X 2016E P/B, at a 6%/9% discount to its big bank peers/H-share average.
Key risks
Weaker-than-expected asset quality deterioration, weaker property prices in low-tier cities where ABC is more
exposed vs peers, NIM pressure from lower deposit spreads given its large deposit base.
Impact on related securities
We maintain our Neutral rating on ABC (A) with 5% upside to our 12-month target price of Rmb3.30 and a 5.2%
2017E dividend yield.
Agricultural Bank of China (H) (1288.HK) is covered by Nan Li, CFA.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy list
Coverage View: Neutral
Growth
Returns *
Multiple
Volatility Volatility
Multiple
Returns *
Growth
Investment Profile
Low High
Percentile 20th 40th 60th 80th 100th
* Returns = Return on Capital For a complete description of the investment
profile measures please refer to the
disclosure section of this document.
Agricultural Bank of China (H) (1288.HK)
Asia Pacific Banks Peer Group Average
Key data Current
Price (HK$) 2.97
12 month price target (HK$) 3.48
Market cap (HK$ mn / US$ mn) 964,638.2 / 124,370.7
Foreign ownership (%) --
12/15 12/16E 12/17E 12/18E
EPS (Rmb) New 0.56 0.53 0.53 0.55
EPS revision (%) 0.0 0.0 0.0 0.0
EPS growth (%) 0.6 (4.4) 0.3 3.5
EPS (dil) (Rmb) New 0.56 0.53 0.53 0.55
P/E (X) 5.3 4.8 4.8 4.6
P/B (X) 0.8 0.7 0.6 0.6
EV/EBITDA (X) NM NM NM NM
Dividend yield (%) 6.2 6.4 6.5 6.7
ROE (%) 17.0 14.5 13.3 12.6
CROCI (%) NM NM NM NM
7,500
8,000
8,500
9,000
9,500
10,000
10,500
11,000
11,500
12,000
12,500
2.0
2.2
2.4
2.6
2.8
3.0
3.2
3.4
3.6
3.8
4.0
Aug-15 Nov-15 Feb-16 May-16
Price performance chart
Agricultural Bank of China (H) (L) Hang Seng China Ent. Index (R)
Share price performance (%) 3 month 6 month 12 month
Absolute 10.8 9.2 (15.1)
Rel. to Hang Seng China Ent. Index 1.0 (5.6) 2.9
Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 8/10/2016 close.
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 20
Agricultural Bank of China (H): Summary financialsProfit model (Rmb mn) 12/15 12/16E 12/17E 12/18E Balance sheet (Rmb mn) 12/15 12/16E 12/17E 12/18E
Net interest income 436,140.0 436,389.6 457,698.5 492,769.9 Gross loans 8,909,918.0 9,758,166.5 10,602,720.9 11,393,875.6
Non-interest income 104,722.0 109,100.1 115,136.7 120,759.9 NPLs 212,867.0 261,047.4 313,773.3 370,739.2
Operating revenue 540,862.0 545,489.8 572,835.1 613,529.8 Loan loss reserves 403,243.0 433,710.6 481,243.7 543,869.2
Non-interest expense (225,818.0) (226,549.4) (230,518.2) (243,137.9) Total interest earning assets 16,740,743.0 18,382,579.3 20,002,401.5 21,630,894.2
Preprovision operating profit 315,044.0 318,940.4 342,316.9 370,391.9 Other non-interest earning assets 1,050,650.0 995,982.3 1,031,860.9 1,094,448.2
Total provision charge (84,172.0) (93,102.1) (116,076.8) (136,681.2) Total assets 17,791,393.0 19,378,561.6 21,034,262.4 22,725,342.4
Associates 0.0 0.0 0.0 0.0 Customer deposits 13,538,360.0 14,540,209.0 15,541,923.8 16,567,028.6
Pretax profit 230,857.0 225,838.3 226,240.1 233,710.7 Total interest-bearing liabilities 15,543,397.0 16,813,407.7 18,084,943.6 19,326,287.2
Tax (50,083.0) (48,736.4) (48,745.2) (50,383.5) Total equity 1,131,986.0 1,245,380.7 1,365,099.7 1,490,497.8
Minorities 0.0 0.0 0.0 0.0
Net profit 180,582.0 172,678.1 173,188.7 179,219.8 CAMEL ratios (%) 12/15 12/16E 12/17E 12/18E
C: Tier 1 capital ratio 11.0 10.9 10.9 10.9
Dividends (59,113.0) (53,181.7) (53,334.9) (55,144.2) C: Equity/loans 13.3 13.3 13.5 13.7
Dividends payout (%) 0.0 0.0 0.0 0.0 C: Equity/assets 6.4 6.4 6.5 6.6
A: NPL ratio 2.4 2.7 3.0 3.3
Earnings growth drivers (%) 12/15 12/16E 12/17E 12/18E A: Loan loss reserves/NPLs 189.4 166.1 153.4 146.7
Net interest margin 2.68 2.43 2.33 2.31 E: Net interest margin 2.68 2.43 2.33 2.31
Provision charge/total loans 0.99 1.00 1.15 1.26 E: Non int inc/oper revenues 19.36 20.00 20.10 19.68
YoY Growth (%) E: Cost-income ratio 41.8 41.5 40.2 39.6
Customer deposits 8.0 7.4 6.9 6.6 E: ROAA 1.07 0.93 0.86 0.82
Loans 9.9 9.6 8.5 7.2 L: Loan/deposit ratio 62.8 64.1 65.1 65.5
Net interest income 1.5 0.1 4.9 7.7
Fee income 3.0 4.4 4.4 3.5 Loan portfolio (%) 12/15 12/16E 12/17E 12/18E
Non-interest income 11.1 4.2 5.5 4.9 Commercial & corporate 65.3 65.3 65.3 65.3
Operating revenue 3.2 0.9 5.0 7.1 Mortgages/home loans 21.6 21.6 21.6 21.6
Operating expenses (0.9) (0.3) (1.8) (5.5) Consumer 30.7 30.7 30.7 30.7
Preprovision operating profit 4.9 1.2 7.3 8.2
Provision charges 25.9 13.7 24.7 17.8 Valuation (current price) 12/15 12/16E 12/17E 12/18E
Pretax profit (0.6) (2.2) 0.2 3.3 P/E basic (X) 5.3 4.8 4.8 4.6
Net profit 0.6 (4.4) 0.3 3.5 P/B (X) 0.84 0.66 0.61 0.55
EPS 0.6 (4.4) 0.3 3.5 P/PPOP (X) 2.6 2.6 2.4 2.2
DPS 0.0 (10.0) 0.3 3.4 Dividend yield (%) 6.2 6.4 6.5 6.7
Market dimensions 12/15 12/16E 12/17E 12/18E EPS, basic (Rmb) 0.56 0.53 0.53 0.55
No of branches 23,670.0 23,670.0 23,670.0 23,670.0 EPS, fully-diluted (Rmb) 0.56 0.53 0.53 0.55
No of staff (000) 503,082.0 503,082.0 503,082.0 503,082.0
Revenues/staff (US$) 171.1 165.2 171.4 183.6 EPS, basic growth (%) 0.6 (4.4) 0.3 3.5
Net profit/staff (US$) 57.1 52.3 51.8 53.6 EPS, fully diluted growth (%) 0.6 (4.4) 0.3 3.5
BVPS (Rmb) 3.49 3.83 4.20 4.59
DuPont analysis (%) 12/15 12/16E 12/17E 12/18E DPS (Rmb) 0.18 0.16 0.16 0.17
ROE 17.0 14.5 13.3 12.6
x leverage 6.3 6.4 6.5 6.5
=ROA 1.07 0.93 0.86 0.82
% of assets 12/15 12/16E 12/17E 12/18E
Net interest income 2.58 2.35 2.27 2.25
Fee income 0.49 0.46 0.45 0.43
Non-interest income 0.62 0.59 0.57 0.55
Operating revenue 3.20 2.94 2.83 2.80
Operating expenses 1.34 1.22 1.14 1.11
Preprovision operating profit 1.87 1.72 1.69 1.69
Loan loss provisions 0.49 0.50 0.57 0.62
Pretax profits 1.37 1.22 1.12 1.07
Taxes 0.30 0.26 0.24 0.23
Note: Last actual year may include reported and estimated data.
Source: Company data, Goldman Sachs Research estimates.
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 21
Punjab National Bank (PNBK.BO): Profitability to remain under pressure; maintain Sell
Source of opportunity
Punjab National Bank (PNB) has outperformed the Sensex by 36%/33% over the past 3M/6M, we believe partly
due to subsiding concerns on asset quality post the NPL clean-up exercise conducted by the Reserve Bank of
India. While we expect new NPL formation is likely to moderate from FY17E onwards, credit costs for state owned
banks (SOEs) including PNB are likely to remain elevated at 3.0%-2.7% over FY17E-18E, leading to a lower
profitability. Given that PNB has: (1) one of the highest impaired loan ratios of 20% (1QFY17), (2) an elevated
Texas ratio at 2.1% (Q1FY17), and (3) a higher proportion of credit costs to operating profit versus its peers, we
believe the bank will continue to face challenges on both growth and profitability. As we expect the stock to
underperform given sustained poor profitability, we reiterate our Sell rating with our 12-m price target of
Rs86/share implying 28% potential downside.
Catalyst
Even though new NPL formation may moderate from 12% in FY16 to 5.0%/3.5% in FY17E/FY18E, credit costs are
likely to remain elevated due to the ageing of NPLs and anemic provisioning coverage ratio on total stressed
loans (25% as of 1QFY17 vs. the India banks average of c.45%).
We believe the proportion of bad loans in the ‘more than 12-month’ ageing bucket (doubtful loans) could move
up from 54% in FY16 to 74%-75% in FY17E/FY18E. As required under the prescribed provisioning norms, credit
costs would remain elevated, leading to a potential net loss in FY17E at Rs2.7bn and marginal profits of Rs5.4bn
in FY18E. Further, the bank may require new capital of Rs98bn, equivalent to c.50% of its current Market Cap, to
take its Tier 1 ratio (8.6% as of Q1FY17) to 10%, similar to SBI and BOB. For additional details please refer to ‘India
Financial Services: Credit cycle at inflection point’, August 3, 2016.
Valuation
As we expect PNB’s profitability to remain low (a loss in FY17E, marginal profit in FY18E) and with an average
ROA of 39bps in FY18E-19E, we value its standalone lending business close to 55% discount to SBI to reflect its
much lower returns (PNB return on risk weighted assets c.0.6% over FY18E-19E vs. SBI at c.1.2%). To this, we
add Rs11/share of value for its other businesses/subsidiaries, contributing to 13% of our overall 12-m target price
of Rs86.
Key risks
Faster macro recovery, gains on its bond book due to a sharper fall in interest rates, and higher-than-expected
recoveries from bad loans.
Punjab National Bank (PNBK.BO) is covered by Rahul Jain.
Growth
Returns *
Multiple
Volatility Volatility
Multiple
Returns *
Growth
Investment Profile
Low High
Percentile 20th 40th 60th 80th 100th
* Returns = Return on Capital For a complete description of the investment
profile measures please refer to the
disclosure section of this document.
Punjab National Bank (PNBK.BO)
Asia Pacific Banks Peer Group Average
Key data Current
Price (Rs) 119.75
12 month price target (Rs) 86.00
Market cap (Rs mn / US$ mn) 189,691.3 / 2,844.3
Foreign ownership (%) 13.0
3/16 3/17E 3/18E 3/19E
EPS (Rs) (20.24) (1.36) 2.73 28.49
EPS growth (%) (222.6) 93.3 300.9 942.9
EPS (diluted) (Rs) (20.24) (1.36) 2.73 28.49
EPS (basic pre-ex) (Rs) (20.24) (1.36) 2.73 28.49
P/E (X) NM NM 43.8 4.2
P/B (X) 0.7 0.6 0.6 0.5
EV/EBITDA (X) NM NM NM NM
Dividend yield (%) 0.0 0.0 0.5 4.8
ROE (%) (10.3) (0.7) 1.4 13.5
CROCI (%) NM NM NM NM
22,000
24,000
26,000
28,000
30,000
32,000
34,000
60
80
100
120
140
160
180
Aug-15 Nov-15 Feb-16 May-16
Price performance chart
Punjab National Bank (L) India BSE30 Sensex (R)
Share price performance (%) 3 month 6 month 12 month
Absolute 45.0 49.8 (24.8)
Rel. to India BSE30 Sensex 34.5 28.1 (23.9)
Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 8/10/2016 close.
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 22
Punjab National Bank: Summary financialsProfit model (Rs mn) 3/16 3/17E 3/18E 3/19E Balance sheet (Rs mn) 3/16 3/17E 3/18E 3/19E
Net interest income 153,117.8 143,397.4 158,354.0 180,569.2 Gross loans 4,327,215.6 4,572,766.6 4,894,230.1 5,448,437.4
Non-interest income 68,770.2 91,461.8 107,687.7 109,726.8 NPLs 558,186.9 505,839.1 458,859.3 350,645.3
Operating revenue 221,888.0 234,859.2 266,041.7 290,295.9 Loan loss reserves 203,955.9 236,980.7 253,867.9 199,418.3
Non-interest expense (99,724.5) (114,199.8) (124,523.1) (139,098.0) Total interest earning assets 6,381,796.0 6,686,707.4 7,238,206.3 8,003,039.2
Preprovision operating profit 122,163.5 120,659.5 141,518.6 151,197.9 Other non-interest earning assets 292,108.5 342,924.3 341,698.0 340,399.4
Total provision charge (179,542.3) (124,118.4) (134,570.5) (78,735.3) Total assets 6,673,904.5 7,029,631.7 7,579,904.4 8,343,438.5
Associates 0.0 0.0 0.0 0.0 Customer deposits 5,530,511.3 6,043,633.6 6,530,375.3 7,185,475.9
Pretax profit (57,378.8) (3,459.0) 6,948.1 72,462.6 Total interest-bearing liabilities 6,153,882.0 6,494,232.6 7,025,850.1 7,730,531.9
Tax 17,634.9 788.7 (1,584.2) (16,522.2) Total equity 383,101.4 389,936.2 394,045.1 436,896.5
Minorities -- -- -- --
Net profit (39,743.9) (2,670.3) 5,363.9 55,940.4 CAMEL ratios (%) 3/16 3/17E 3/18E 3/19E
C: Tier 1 capital ratio 8.4 8.1 7.9 8.0
Dividends 0.0 0.0 1,072.8 11,188.1 C: Equity/loans 9.3 9.0 8.5 8.3
Dividends payout (%) 0.0 0.0 20.0 20.0 C: Equity/assets 5.7 5.5 5.2 5.2
A: NPL ratio 12.9 11.1 9.4 6.4
Earnings growth drivers (%) 3/16 3/17E 3/18E 3/19E A: Loan loss reserves/NPLs 36.5 46.8 55.3 56.9
Net interest margin 2.41 2.09 2.17 2.27 E: Net interest margin 2.41 2.09 2.17 2.27
Provision charge/total loans 4.35 2.86 2.90 1.50 E: Non int inc/oper revenues 30.99 38.94 40.48 37.80
YoY Growth (%) E: Cost-income ratio 44.9 48.6 46.8 47.9
Customer deposits 10.3 9.3 8.1 10.0 E: ROAA (0.63) (0.04) 0.07 0.70
Loans 8.4 5.2 7.0 13.1 L: Loan/deposit ratio 74.6 71.7 71.1 73.1
Net interest income (7.5) (6.3) 10.4 14.0
Fee income 14.7 11.2 10.0 12.0 Loan portfolio (%) 3/16 3/17E 3/18E 3/19E
Non-interest income 16.7 33.0 17.7 1.9 Commercial & corporate 81.9 79.9 78.3 78.7
Operating revenue (1.1) 5.8 13.3 9.1 Mortgages/home loans 6.2 7.2 8.1 8.7
Operating expenses 4.9 (14.5) (9.0) (11.7) Consumer 13.4 14.9 16.5 17.6
Preprovision operating profit 2.2 (1.2) 17.3 6.8
Provision charges 104.1 (28.9) 9.5 (41.5) Valuation (current price) 3/16 3/17E 3/18E 3/19E
Pretax profit (245.0) 94.0 300.9 942.9 P/E basic (X) NM NM 43.8 4.2
Net profit (229.8) 93.3 300.9 942.9 P/B (X) 0.68 0.62 0.61 0.55
EPS (222.6) 93.3 300.9 942.9 P/PPOP (X) 1.6 1.6 1.3 1.3
DPS (100.0) -- -- 942.9 Dividend yield (%) 0.0 0.0 0.5 4.8
Market dimensions 3/16 3/17E 3/18E 3/19E EPS, basic (Rs) (20.24) (1.36) 2.73 28.49
No of branches 6,760.0 6,959.0 7,159.0 7,359.0 EPS, fully-diluted (Rs) (20.24) (1.36) 2.73 28.49
No of staff (000) 69.1 70.1 72.2 74.2
Revenues/staff (US$) 49,039.6 50,015.5 55,281.5 58,659.4 EPS, basic growth (%) (222.6) 93.3 300.9 942.9
Net profit/staff (US$) (8,783.8) (568.7) 1,114.6 11,303.7 EPS, fully diluted growth (%) (222.6) 93.3 300.9 942.9
BVPS (Rs) 188.85 193.04 195.69 218.01
DuPont analysis (%) 3/16 3/17E 3/18E 3/19E DPS (Rs) 0.00 0.00 0.55 5.70
ROE (10.3) (0.7) 1.4 13.5
x leverage 6.1 5.6 5.4 5.2
=ROA (0.63) (0.04) 0.07 0.70
% of assets 3/16 3/17E 3/18E 3/19E
Net interest income 2.41 2.09 2.17 2.27
Fee income 0.50 0.51 0.53 0.54
Non-interest income 1.08 1.33 1.47 1.38
Operating revenue 3.49 3.43 3.64 3.65
Operating expenses 1.57 1.67 1.70 1.75
Preprovision operating profit 1.92 1.76 1.94 1.90
Loan loss provisions 2.72 1.79 1.84 0.99
Pretax profits (0.90) (0.05) 0.10 0.91
Taxes (0.28) (0.01) 0.02 0.21
Note: Last actual year may include reported and estimated data.
Source: Company data, Goldman Sachs Research estimates.
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 23
Appendix
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 24
Appendix: Dividend yield score card charts
Exhibit 30: Top 30 dividend yield banks versus EPS growth
Exhibit 31: Bottom 30 dividend yield banks versus EPS growth
Note: Priced as of August 10, 2016.
Note: Priced as of August 10, 2016.
Source: Bloomberg, Goldman Sachs Global Investment Research
Source: Bloomberg, Goldman Sachs Global Investment Research
Exhibit 32: Top 30 banks in Asia with the highest dividend yield banks versus
bond spread
Exhibit 33: Bottom 30 banks in Asia with the lowest dividend yield versus
bond spread
Source: Bloomberg, Goldman Sachs Global Investment Research
Source: Bloomberg, Goldman Sachs Global Investment Research
BOQ
MAYNAB
WBCANZ
BEN
CBAAozora
CIMBSMFG Woori IBK
KTB
HSBC
ABC (H)
MegaBOC (H)
BOCOM (H)ICBC (H)
CCB (H)HSBCNCB (H) Chongqing
ICBC (A)CCB (A)
ABC (A)CMB (H)
BOC BOCOM (A)Chongqing Rural
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
(10) (5) - 5 10 15 20
Highest FX Volatility (Q1)High FX Volatility (Q2)Low FX Volatility (Q3)Lowest FX Volatility (Q4)
Dividend Yield 2017E (%)
EPS 3-yr CAGR 2015 - 2018E (%)
Suruga
Shinsei
Shizuoka
Chiba
KTKM
INBKAXBK
HDBKSBI YESB
BBCA
BOBICBK
BNKFGBBTNHana
BMRI
BBRI
KBFG
MBT
BDO
KBANK
Ping An BEADSBG
E.SunCTBC
Chang HwaNanjing
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
(10) (5) - 5 10 15 20 25 30 35
Highest FX Volatility (Q1)High FX Volatility (Q2)Low FX Volatility (Q3)Lowest FX Volatility (Q4)
Dividend Yield (%)
EPS 3-yr CAGR 2015 - 2018E (%)
Outliers : Punjab National Bank (-45%,0)
6
6 5 55 5 5 5 5
4 4 4 4 4 4 4 4 4 4 3 3 3 3 3 3 3 3 3 3 3
HSB
C
Aoz
ora
Meg
a
BO
Q
SMFG
NA
B
Miz
uho
HSB
Res
ona
WB
C
Post
Ban
k
MU
FG AN
Z
BEN
SMTH
Firs
t
AB
C (H
)
CB
A
Con
cord
ia
BO
C (H
K)
KTB
Tais
hin
BO
C (H
)
Woo
ri
IBK
MA
Y
BO
CO
M (H
)
ICB
C (H
)
Chi
ba
CC
B (H
)
FY2017E Dividend Yield - Domestic 10Y Bond Yield (%)
-7 -7-6 -6 -6 -6 -6
-6 -5 -5-5 -4 -4 -4 -4
-2-1
-1-1 0 0 0
1 1 1 1 1 1 1 1
PNB
KTK
M
INB
K
AXB
K
HD
BK
SBI
YESB
BB
CA
BO
B
ICB
K
BB
TN
BM
RI
BB
RI
BD
MN
BB
NI
MB
T
BD
O
Ping
An
PBK
HLB
K
AM
MB
Nan
jing
SPD
B
Suru
ga
KB
AN
K
Zhes
hang
Shin
sei
BN
KFG
Nin
gbo
BEA
FY2017E Dividend Yield - Domestic 10Y Bond Yield (%)
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 25
Exhibit 34: Top 30 dividend yield stocks based on FY2017E Exhibit 35: Bottom 30 dividend yield stocks based on FY2017E
Note: Priced as of 10 August 2016.
Note: Priced as of 10 August 2016.
Source: Goldman Sachs Global Investment Research
Source: Goldman Sachs Global Investment Research
Exhibit 36: EPS CAGR (FY15-18E) for Top 30 dividend yield stocks
Exhibit 37: EPS CAGR (FY15-18E) for Bottom 30 dividend yield stocks
Source: Company data, Goldman Sachs Global Investment Research
Source: Company data, Goldman Sachs Global Investment Research
7 77 7
66 6 6 6 6 6 6 6 6 6 6 6 5 5 5 5 5 5 5
5 55 5 5 5
HS
BC
BO
QM
AY
NA
BA
BC
(H)
Meg
aW
BC
BO
C (
H)
AN
ZB
EN
BO
CO
M (
H)
ICB
C (H
)C
CB
(H)
HS
BC
NC
B (H
)K
TB
Cho
ngq
ing
CB
AA
ozo
raIC
BC
(A)
CC
B (A
)A
BC
(A)
CM
B (H
)B
OC
(A
)B
OC
OM
(A
)C
IMB
SM
FGC
QR
BW
oor
iIB
KTop
30D
ivid
end
Yie
ld 2
017E
0 00 1 1 1 1 1 1 1
12 2 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3
PN
BK
TK
MS
urug
aS
hins
eiIN
BK
AX
BK
HD
BK
MB
TS
BI
YE
SB
BB
CA
BO
BB
DO
Pin
g A
nIC
BK
BE
AD
SB
GB
NK
FGE
.Su
nB
BT
NC
TB
CH
ana
Sh
izuo
kaC
hang
Hw
aB
MR
IC
hib
aN
anjin
gK
BA
NK
BB
RI
KB
FGBo
ttom
30D
ivid
end
Yie
ld 2
017E
20
13 119
5 5 5 5 4 4 4 3 1 1 1 1 1 0 0 0 0 0
0 0 0 -1 -2 -2
-6-9
CIM
BC
hong
qing
Aoz
ora
CQ
RB
CM
B (H
)M
ega
MA
YC
NC
B (H
)H
SB
CK
TB IBK
BO
QW
oori
ICB
C(A
)B
OC
OM
(A)
ICB
C (H
)B
OC
OM
(H)
CC
B (A
)B
OC
(A)
CB
AS
MFG
WB
CC
CB
(H)
AB
C (A
)B
OC
(H)
AB
C (H
)A
NZ
NA
BB
EN
HS
B
Top
30 D
iv Y
ield
201
7E;
FY15
-18E
EP
S C
AG
R (
%)
29 28 2521
16 15 15 13 13 12 11 11 11 10 8 7 5 5 4 2 2 1 1
0 -1 -1 -3 -4 -5
-45
KTK
MY
ES
BIN
BK
HD
BK
MB
TB
BTN
AX
BK
BB
CA
BD
ON
anjin
gB
MR
IH
ana
BB
RI
KB
AN
KP
ing
An
Sur
uga
E.S
un SB
IB
OB
ICB
KK
BFG
BE
AS
hizu
oka
Cha
ng H
wa
Chi
baC
TBC
BN
KFG
DS
BG
Shi
nsei
PN
B
Bo
ttom
30
Div
Yie
ld 2
017E
;FY
15-1
8E E
PS
CA
GR
(%
)
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 26
Exhibit 38: FX changes volatility across Asia Pacific
Source: Bloomberg.
Exhibit 39: FY17E dividend payout ratio for Top 30 dividend yield stocks
Exhibit 40: FY17E dividend payout ratio for Bottom 30 dividend yield stocks
Source: Goldman Sachs Global Investment Research
Source: Goldman Sachs Global Investment Research
2.8
2.7
2.6
2.4
2.3
2.2
1.5
1.4
1.4
1.2
0.7
0.1
4 4 43
3 3
2 2 21
1
1
Japan Australia Malaysia Indonesia India SouthKorea
Thailand Singapore Philippines Taiwan China Hong Kong
Stan
dard
Dev
iatio
n of
Mon
thly
Cha
nge
in F
X/U
SD (%
)
Note: Bubble represents Quartile Rank of FX Volatility per country (1=Lowest Volatility, 4=Highest Volatility)
83 80 80 80 80 78 7771 70
66
5042 40
32 32 31 31 31 31 31 31 31 31 31 31 30 3026 26 22
BE
NH
SB
WB
CB
OQ
CB
AH
SB
CN
AB
MA
YA
NZ
Meg
aA
ozo
raC
IMB
KT
BB
OC
OM
(A)
BO
CO
M (H
)B
OC
(H)
BO
C (A
)A
BC
(H)
AB
C (A
)W
oo
riC
CB
(H)
ICB
C(A
)IC
BC
(H)
CM
B (H
)C
CB
(A)
IBK
SM
FGC
NC
B (H
)C
hon
gq
ing
CQ
RB
Top
30
Div
Yie
ld 2
017E
;FY
17E
Div
iden
d P
ayo
ut (
%) 44
3530 28 27 27 26 25 25 25 25 24 24 23 22 22 21 20 18 18 18 17
14 14 12 116 5 4
0B
EA
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E D
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out (
%)
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 27
Exhibit 41: FY17E dividend-bond yield for Top 30 dividend yield stocks Exhibit 42: FY17E dividend-bond yield for Bottom 30 dividend yield stocks
Note: Bond refers to current 10Y Government Bond Yield
Note: Bond refers to current 10Y Government Bond Yield
Source: Bloomberg, Goldman Sachs Global Investment Research
Source: Bloomberg, Goldman Sachs Global Investment Research
Exhibit 43: Dividend volatility growth for Top 30 dividend yield stocks
Exhibit 44: Dividend volatility growth in Bottom 30 dividend yield stocks
Source: Company data, Goldman Sachs Global Investment Research.
Source: Company data, Goldman Sachs Global Investment Research.
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August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 28
Exhibit 45: Share count CAGR (FY15-18E) for Top 30 dividend yield stocks Exhibit 46: Share count CAGR (FY15-18E) for Bottom 30 dividend yield stocks
Source: Company data, Goldman Sachs Global Investment Research
Source: Company data, Goldman Sachs Global Investment Research
Exhibit 47: Top 30 dividend yield in FY17E score card values
Source: Bloomberg, Goldman Sachs Global Investment Research.
4
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Top 30 Dividend Yield Stocks (sorted by avg score)
Rank Company Country RatingEPS CAGR FY15-18E
(%)FX Monthly Growth
Volatility (%)Dividend Payout Ratio
FY17E (%)Dividend Yield FY17E -
Bond Yield (%)Dividend Growth
Volatility
1 Chongqing Rural Commercial Bank China Neutral 8.76 0.70 21.9 1.89 0.872 HSBC Holdings Hong Kong Buy 4.37 0.11 77.6 6.38 0.233 Bank of Chongqing China Neutral 12.72 0.70 25.0 2.70 1.554 China Merchants Bank (H) China Neutral 5.42 0.70 30.0 2.33 0.445 Agricultural Bank of China (H) China Buy -0.83 0.70 30.8 3.63 0.406 Mega Financial Holdings Taiwan Neutral 4.84 1.16 65.0 5.50 1.067 China CITIC Bank (H) China Buy* 4.54 0.70 25.3 2.72 8.728 Krung Thai Bank Thailand Neutral 4.36 1.51 40.6 3.63 0.259 Bank of China (H) China Neutral -0.27 0.70 30.9 3.26 0.6010 Bank of Communications (H) China Neutral 0.58 0.70 31.4 3.02 0.5011 Hang Seng Bank Hong Kong Neutral -8.80 0.11 80.0 4.71 0.1912 China Construction Bank (A) China Buy 0.47 0.70 30.0 2.42 1.0913 Agricultural Bank of China (A) China Neutral -0.25 0.70 30.8 2.41 0.4014 Bank of China (A) China Sell 0.32 0.70 30.9 2.31 0.5515 Bank of Communications (A) China Neutral 1.17 0.70 31.4 2.08 0.4816 Sumitomo Mitsui Financial Group Japan Buy* 0.09 2.82 29.4 4.99 0.3517 Woori Bank South Korea Sell 1.46 2.19 30.4 3.25 0.0018 Bank of Queensland Ltd. Australia Neutral 2.67 2.71 79.1 5.22 0.1419 Westpac Banking Corp. Australia Neutral 0.08 2.71 80.2 4.22 0.1220 ICBC (H) China Buy 0.81 0.70 30.0 2.99 2.3921 Commonwealth Bank of Australia Australia Neutral 0.31 2.71 79.0 3.54 0.1122 ICBC (A) China Buy 1.40 0.70 30.0 2.45 2.2223 Industrial Bank of Korea South Korea Neutral 3.72 2.19 29.7 3.23 69.5524 National Australia Bank Australia Neutral -1.71 2.71 76.4 4.80 0.1125 ANZ Banking Group Australia Buy* -1.56 2.71 69.6 4.10 0.1326 Bendigo and Adelaide Bank Ltd. Australia Sell -5.98 2.71 83.9 3.98 0.1727 China Construction Bank (H) China Buy -0.12 0.70 30.0 2.83 1.2728 Aozora Bank Japan Buy 11.44 2.82 50.0 5.66 1.3729 CIMB Group Holdings Malaysia Buy 19.53 2.60 41.9 1.23 0.9730 Malayan Banking Bhd Malaysia Neutral 4.70 2.60 70.0 3.12 1.94
1 2 3 4 5
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 29
Exhibit 48: Bottom 30 dividend yield in FY17E score card values
Source: Bloomberg, Goldman Sachs Global Investment Research.
Bottom 30 Dividend Yield (sorted by average score)
Rank Company Country RatingEPS CAGR FY15-18E
(%)FX Monthly Growth
Volatility (%)Dividend Payout Ratio
FY17E (%)Dividend Yield FY17E -
Bond Yield (%)Dividend Growth
Volatility
1 Punjab National Bank India Sell -45.1 2.3 0.0 -7.4 0.52 Chang Hwa Commercial Bank Taiwan Neutral -0.2 1.2 35.0 1.9 1.83 Bank Mandiri Indonesia Neutral 11.2 2.4 30.0 -4.7 1.24 KB Financial Group South Korea Buy 1.5 2.2 25.3 1.5 72.45 Shinsei Bank Japan Buy -4.9 2.8 4.9 0.9 0.36 Bank of Baroda India Sell 3.7 2.3 24.3 -5.5 0.47 ICICI Bank India Neutral 2.5 2.3 27.0 -5.5 0.38 Bank of East Asia Hong Kong Sell 1.5 0.1 43.9 1.1 0.89 Dah Sing Banking Group Hong Kong Neutral -4.5 0.1 24.2 1.3 0.410 BNK Financial Group South Korea Neutral -2.9 2.2 11.9 0.9 0.411 CTBC Financial Holdings Taiwan Neutral -1.5 1.2 25.0 1.7 1.012 Suruga Bank Japan Sell 7.0 2.8 6.4 0.7 0.313 State Bank of India India Buy 4.8 2.3 23.0 -6.3 0.314 BDO Unibank Philippines Neutral 12.8 1.4 26.3 -1.8 1.215 Bank Tabungan Negara Indonesia Neutral 15.2 2.4 20.0 -5.0 0.716 Hana Financial Group South Korea Neutral 11.2 2.2 18.5 1.1 5.417 Shizuoka Bank Japan Sell 0.7 2.8 25.2 2.8 0.218 Chiba Bank Japan Neutral -1.1 2.8 22.5 3.0 0.119 Bank Rakyat Indonesia Indonesia Neutral 11.1 2.4 27.0 -4.5 0.320 Kotak Mahindra Bank India Neutral 29.0 2.3 4.0 -7.3 0.321 Yes Bank India Buy* 27.9 2.3 18.0 -6.3 0.222 Ping An Bank Co. China Neutral 8.4 0.7 11.5 -0.9 4.523 E.Sun Financial Holding Taiwan Neutral 5.3 1.2 25.0 1.6 0.524 Bank Of Nanjing China Neutral 11.6 0.7 18.0 -0.1 1.425 IndusInd Bank India Neutral 24.9 2.3 17.3 -6.6 0.126 Axis Bank India Buy 14.7 2.3 14.5 -6.5 0.227 HDFC Bank India Buy 20.6 2.3 20.8 -6.4 0.128 Metropolitan Bank and Trust Co Philippines Neutral 16.3 1.4 13.9 -2.6 0.429 Bank Central Asia Indonesia Neutral 13.2 2.4 22.1 -6.0 0.130 Kasikornbank Thailand Neutral 10.0 1.5 27.5 0.9 0.1
1 2 3 4 5
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 30
Exhibit 49: Total shareholder return for Top and Bottom 30 dividend yield stocks in 2017E
Note: For PNB, EPSg CAGR refers to FY15-FY18E, as we forecast loss in FY17E.
Source: Goldman Sachs Global Investment Research
MSCI disclosure
All MSCI data used in this report is the exclusive property of MSCI, Inc. (MSCI). Without prior written permission of MSCI, this information and any other MSCI
intellectual property may not be reproduced or redisseminated in any form and may not be used to create any financial instruments or products or any indices.
This information is provided on an “as is” basis, and the user of this information assumes the entire risk of any use made of this information. Neither MSCI, any
of its affiliates nor any third party involved in, or related to, computing or compiling the data makes any express or implied warranties or representations with
respect to this information (or the results to be obtained by the use thereof), and MSCI, its affiliates and any such third party hereby expressly disclaim all
warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any
of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in, or related to, computing or compiling the data have any liability for any
direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. MSCI and the
MSCI indexes are service marks of MSCI and its affiliates. The Global Industry Classification Standard (GICS) were developed by and is the exclusive property of
MSCI and Standard & Poor’s. GICS is a service mark of MSCI and S&P and has been licensed for use by The Goldman Sachs Group, Inc.
30
22 20
13 12 10 9 9 8 8 7 7 5 5 5 5 5 4 4 4 4 4 4 4 4 4 3 2
-3
-13
-45
-20
-12 -10-8
-6 -5 -4 -4
0 1 2 26 7 9 9 10 11 12 13 13 14 14 16 17
21 2226 28
-60%
-40%
-20%
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20%
40%
60%C
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Dividend Yield FY17E
EPSg CAGR FY15-17E
Top 30 Dividend Yield FY17E Bottom 30 Dividend Yield FY17E
Total Shareholder Return (i.e Dividend yield + EPSg)
Total shareholder return in this chart defines as addition of return from Div. Yield and Forecasted EPS growth
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 31
Disclosure Appendix
Reg AC
We, Ben Koo, Andrew Lyons, Gurpreet Singh Sahi, CFA, Nan Li, CFA and Rahul Jain, hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject
company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed
in this report.
Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs' Global Investment Research division.
Investment Profile
The Goldman Sachs Investment Profile provides investment context for a security by comparing key attributes of that security to its peer group and market. The four key attributes depicted are: growth,
returns, multiple and volatility. Growth, returns and multiple are indexed based on composites of several methodologies to determine the stocks percentile ranking within the region's coverage
universe.
The precise calculation of each metric may vary depending on the fiscal year, industry and region but the standard approach is as follows:
Growth is a composite of next year's estimate over current year's estimate, e.g. EPS, EBITDA, Revenue. Return is a year one prospective aggregate of various return on capital measures, e.g. CROCI,
ROACE, and ROE. Multiple is a composite of one-year forward valuation ratios, e.g. P/E, dividend yield, EV/FCF, EV/EBITDA, EV/DACF, Price/Book. Volatility is measured as trailing twelve-month
volatility adjusted for dividends.
Quantum
Quantum is Goldman Sachs' proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used for in-depth analysis of a single company, or to make
comparisons between companies in different sectors and markets.
GS SUSTAIN
GS SUSTAIN is a global investment strategy aimed at long-term, long-only performance with a low turnover of ideas. The GS SUSTAIN focus list includes leaders our analysis shows to be well
positioned to deliver long term outperformance through sustained competitive advantage and superior returns on capital relative to their global industry peers. Leaders are identified based on
quantifiable analysis of three aspects of corporate performance: cash return on cash invested, industry positioning and management quality (the effectiveness of companies' management of the
environmental, social and governance issues facing their industry).
Disclosures
Coverage group(s) of stocks by primary analyst(s)
Ben Koo: Asia Pacific Financials. Andrew Lyons: Australia-Banks, Australia-Insurance. Gurpreet Singh Sahi, CFA: Asia Pacific Exchanges, Asia Pacific Financials, Japan-Brokers & Asset Managers. Nan
Li, CFA: China Brokers, China Financials. Rahul Jain: Asia Pacific Financials.
Asia Pacific Exchanges: Hong Kong Exchanges, Singapore Exchange.
Asia Pacific Financials: AIA Group, AMMB Holdings, Axis Bank, Bajaj Finance, Bangkok Bank, Bank Central Asia, Bank Danamon, Bank Mandiri, Bank Negara Indonesia, Bank of Baroda, Bank of East
Asia, Bank Rakyat Indonesia, Bank Tabungan Negara, BDO Unibank, BNK Financial Group, BOC Hong Kong (Holdings), Cathay Financial Holding, Chailease Holdings, Chang Hwa Commercial Bank,
China Development Financial, CIMB Group Holdings, CTBC Financial Holdings, Dah Sing Banking Group, Dah Sing Financial Holdings, DBS Group Holdings, DGB Financial Group, E.Sun Financial
Holding, First Financial Holdings, Fubon Financial Holdings, Hana Financial Group, Hang Seng Bank, HDFC Bank, Hong Leong Bank, Housing Development Finance Corp., HSBC Holdings, ICICI Bank,
IDFC Bank Ltd., IndusInd Bank, Industrial Bank of Korea, Kasikornbank, KB Financial Group, Kotak Mahindra Bank, Krung Thai Bank, LIC Housing Finance, Mahindra & Mahindra Financial Svcs,
Malayan Banking Bhd, Mega Financial Holdings, Metropolitan Bank and Trust Co, Oversea-Chinese Banking Corp., Public Bank Bhd, Punjab National Bank, Shin Kong Financial Holdings, Shinhan
Financial Group, Shriram Transport Finance, Siam Commercial Bank, SinoPac Holdings, Standard Chartered Bank, State Bank of India, Taishin Financial Holdings, TMB Bank Public Co., United
Overseas Bank, Woori Bank, Yes Bank, Yuanta FHC.
Australia-Banks: ANZ Banking Group, Bank of Queensland Ltd., Bendigo and Adelaide Bank Ltd., Commonwealth Bank of Australia, Macquarie Group, National Australia Bank, Pepper Group, Westpac
Banking Corp..
Australia-Insurance: Genworth Mortgage Ins. Australia.
China Brokers: China Galaxy Securities, China International Capital Corp., China Merchants Securities, CITIC Securities (A), CITIC Securities (H), Everbright Securities, GF Securities Co.(A), GF Securities
Co.(H), Haitong Securities (A), Haitong Securities (H), Huatai Securities (A), Huatai Securities (H).
China Financials: Agricultural Bank of China (A), Agricultural Bank of China (H), Bank of Beijing, Bank of China (A), Bank of China (H), Bank of Chongqing, Bank of Communications (A), Bank of
Communications (H), Bank of Nanjing, Bank of Ningbo, Bank of Qingdao Co., China Cinda Asset Management Co., China CITIC Bank (A), China CITIC Bank (H), China Construction Bank (A), China
Construction Bank (H), China Everbright Bank, China Huarong Asset Management Co., China Life Insurance Co. (A), China Life Insurance Co. (H), China Merchants Bank (A), China Merchants Bank (H),
China Minsheng Banking (A), China Minsheng Banking (H), China Pacific Insurance (A), China Pacific Insurance (H), China Taiping Insurance Holdings, China Zheshang Bank Co., Chongqing Rural
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 32
Commercial Bank, Far East Horizon, Hua Xia Bank, ICBC (A), ICBC (H), Industrial Bank, New China Life Insurance (A), New China Life Insurance (H), PICC Group, PICC Property and Casualty, Ping An
Bank Co., Ping An Insurance Group (A), Ping An Insurance Group (H), Shanghai Pudong Development Bank, Universal Medical.
Japan-Brokers & Asset Managers: Daiwa Securities Group, Japan Exchange Group, Nomura Holdings.
Company-specific regulatory disclosures
The following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, "Goldman Sachs") and companies covered by the Global Investment Research Division of
Goldman Sachs and referred to in this research.
Goldman Sachs has received compensation for investment banking services in the past 12 months: Agricultural Bank of China (H) (HK$3.01) and HSBC Holdings (HK$54.30)
Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Agricultural Bank of China (H) (HK$3.01) and HSBC Holdings (HK$54.30)
Goldman Sachs had an investment banking services client relationship during the past 12 months with: Agricultural Bank of China (H) (HK$3.01) and HSBC Holdings (HK$54.30)
Goldman Sachs had a non-investment banking securities-related services client relationship during the past 12 months with: Agricultural Bank of China (H) (HK$3.01), HSBC Holdings (HK$54.30) and
Punjab National Bank (Rs116.25)
Goldman Sachs had a non-securities services client relationship during the past 12 months with: Agricultural Bank of China (H) (HK$3.01), HSBC Holdings (HK$54.30) and Punjab National Bank
(Rs116.25)
Goldman Sachs makes a market in the securities or derivatives thereof: Agricultural Bank of China (H) (HK$3.01) and HSBC Holdings (HK$54.30)
Goldman Sachs International acts as corporate broker to: HSBC Holdings (HK$54.30)
Goldman Sachs holds a position greater than U.S. $15 million (or equivalent) in the debt or debt instruments of: HSBC Holdings (HK$54.30)
Distribution of ratings/investment banking relationships
Goldman Sachs Investment Research global Equity coverage universe
Rating Distribution Investment Banking Relationships
Buy Hold Sell Buy Hold Sell
Global 31% 54% 15% 66% 60% 50%
As of July 1, 2016, Goldman Sachs Global Investment Research had investment ratings on 2,963 equity securities. Goldman Sachs assigns stocks as Buys and Sells on various regional Investment
Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for the purposes of the above disclosure required by the FINRA Rules. See 'Ratings, Coverage groups
and views and related definitions' below. The Investment Banking Relationships chart reflects the percentage of subject companies within each rating category for whom Goldman Sachs has provided
investment banking services within the previous twelve months.
Price target and rating history chart(s)
101
100102
10194 92 94
9087
8392
88
838280
7877
7067
6657
15,000
17,000
19,000
21,000
23,000
25,000
27,000
29,000
405060708090
100110120
HSBC Holdings (0005.HK)
Goldman Sachs rating and stock price target history
Stock Price Currency : Hong Kong Dollar
Source: Goldman Sachs Investment Research for ratings and price targets; FactSet closing prices as of 6/30/2016.
The price targets show n should be considered in the context of all prior published Goldman Sachs research, which may or may not have included price targets, as w ell as developments relating to the company, its industry and financial markets.
Rating
Price target
Price target at removal
Covered by Gurpreet Singh Sahi, CFA,as of May 20, 2015
Not covered by current analyst
Hang Seng Index
Index
Price
Stoc
kPric
e
AB
S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J2013 2014 2015 2016
4.4 5
4.9
4.7
3.48
6,0007,0008,0009,00010,00011,00012,00013,00014,00015,00016,000
2.00
2.50
3.00
3.50
4.00
4.50
5.00
Agricultural Bank of China (H) (1288.HK)
Goldman Sachs rating and stock price target history
Stock Price Currency : Hong Kong Dollar
Source: Goldman Sachs Investment Research for ratings and price targets; FactSet closing prices as of 6/30/2016.
The price targets show n should be considered in the context of all prior published Goldman Sachs research, which may or may not have included price targets, as w ell as developments relating to the company, its industry and financial markets.
Rating
Price target
Price target at removal
Covered by Nan Li, CFA,as of Jun 19, 2015
Not covered by current analyst
Hang Seng China Ent. Index
Index
Price
Stoc
kPric
e
AB
S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J2013 2014 2015 2016
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 33
Regulatory disclosures
Disclosures required by United States laws and regulations
See company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this report: manager or co-manager in a pending transaction; 1% or
other ownership; compensation for certain services; types of client relationships; managed/co-managed public offerings in prior periods; directorships; for equity securities, market making and/or
specialist role. Goldman Sachs trades or may trade as a principal in debt securities (or in related derivatives) of issuers discussed in this report.
The following are additional required disclosures: Ownership and material conflicts of interest: Goldman Sachs policy prohibits its analysts, professionals reporting to analysts and members of their
households from owning securities of any company in the analyst's area of coverage. Analyst compensation: Analysts are paid in part based on the profitability of Goldman Sachs, which includes
investment banking revenues. Analyst as officer or director: Goldman Sachs policy prohibits its analysts, persons reporting to analysts or members of their households from serving as an officer,
director, advisory board member or employee of any company in the analyst's area of coverage. Non-U.S. Analysts: Non-U.S. analysts may not be associated persons of Goldman, Sachs & Co. and
therefore may not be subject to FINRA Rule 2241 or FINRA Rule 2242 restrictions on communications with subject company, public appearances and trading securities held by the analysts.
Distribution of ratings: See the distribution of ratings disclosure above. Price chart: See the price chart, with changes of ratings and price targets in prior periods, above, or, if electronic format or if
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156140136
100
106102
142
212
214
211197
108102
106
104
11173
15,000
17,000
19,000
21,000
23,000
25,000
27,000
29,000
507090
110130150170190210230250
Punjab National Bank (PNBK.BO)
Goldman Sachs rating and stock price target history
Stock Price Currency : Indian Rupee
Source: Goldman Sachs Investment Research for ratings and price targets; FactSet closing prices as of 6/30/2016.
The price targets show n should be considered in the context of all prior published Goldman Sachs research, which may or may not have included price targets, as w ell as developments relating to the company, its industry and financial markets.
Rating
Price target
Price target at removal
Covered by Rahul Jain,as of Jul 22, 2014
Not covered by current analyst
India BSE30 Sensex
Index
Price
Stoc
kPric
e
Jul 1, 2013 BJan 16, 2014 to S from N
Jul 2 Mar 26 May 27N N
AS
S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J2013 2014 2015 2016
August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 34
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August 12, 2016 Asia Pacific: Banks
Goldman Sachs Global Investment Research 35
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