The analyst’s call

Based on comparison, ICBC achieved robust loan expansion and preserved its most conservative leverage at the best capital strength by Sep 09.

In preview of the inflationary 2010 with expected rate hikes, ICBC is better equipped to tap into rising loan yields and investment returns. We expect a 15.0% loan book expansion and 22% ROE for ICBC in 2010, matching sector average at 14.6% and 20.0%, and above its historical loan CAGR at 12.2% over 2003-08.

ICBC has expanded its exposure to low risk loan projects including infra¬structure and mortgage, leading to a moderate decrease in risk-weighted assets-to-total assets ratio to 45% as of Sep 09, from 47% as of FY08. ICBC will take up more SME loans next year, but we expect the risk weight to stay at a comfortable range of below 50% for slow capital consumption. ICBC’s loan-to-deposit ratio of 57.9%, was the lowest among the H-share banks as of Sep 09.

As the first batch of China banks to implement Basel II in 2010, ICBC ex¬pects further improvement on its capital adequacy ratios based on its trial run. With core and total CAR at 9.9% and 12.6%, ICBC is best equipped among peers to weather financial market and economic turbulences, as well as to capture growth opportunities.