Contents

More favourable policies turn
profit growth positive 5
Macro indicators “bottoming”? 5
Monetary easing achieves goal of capital flow 6
Profit growth turns positive 7
Prefer mid-size banks on favourable monetary policy 7
NIM to bottom in 2Q09 9
Macro data may indicate decline is “bottoming” 9
NIM to bottom in 1H09? 12
Beyond 2009…policy remains a critical driver of profits 15
Mid-size banks are likely winners 17
Loan growth revised to
RMB7.6bn in 2009e 18
Quality growth? 18
Lending curbs…again? 20
Revised loan growth lifts 2009e earnings 2-10% 21
NPLs: deferred to later 23
NPL – not a worry for 2009 23
Looking beyond… 24
A-listed company data raises some questions on NPL risks 25
Coverage ratio for SOE banks likely to rise 26
2009: NPL ratio flat to down; coverage likely a policy issue 26
“Worst case” scenario from loan carve-outs of the past 27
Company profiles 29
Bank of China (3988) 31
Bank of Communications (3328) 37
China Construction Bank (939) 43
China CITIC Bank (998) 49
China Merchants Bank (3968) 57
Industrial and Commercial Bank of China (1398) 63
Disclosure appendix 68
Disclaimer 71