Event:
1) Influenced by bankruptcy liquidation of Lehman Brothers Holdings Inc., prices of 11 banking shares saw over 5% decline except for Bank of Nanjing, Bank of Ningbo and Bank of Beijing.
2) BOC, China Merchants Bank and ICBC announced their holding credit assets such as debenture and loans of Lehman Brothers Holdings Inc. and its subsidiaries totaled up to USD70mn-USD151mn.
Our analysis and estimation:
China Merchants Bank suffered most seriously. We figure out asset impairment expenditure of three merchant banks according to 30%-100% impairment, results turned out to be: China Merchants Bank may suffer Rmb0.01-0.019/share to the utmost, BOC for Rmb0.001-0.003/share and ICBC the lowest, Rmb0.001-0.002/share.
Estimation has reached the bottom line. Closing price today indicates that 9 banking shares besides China Merchant Bank were estimated at 1.21x-2.01x, while China Merchant Bank slightly higher, at 2.48x.
Earnings forecast and rating:
Estimation of banking shares has reached bottom line; however, considering time needed to release non-performing loan risks induced from profitability deterioration of industrial companies, we maintain “Neutral” rating intact.