Bank AH share premiums are still at historically high levels. On the one hand, tax policy expectations are improving, and premiums are expected to subside with financial support. On the other hand, the discount on H shares also brings dividend advantages. At the same time, it is also necessary to consider the relative disadvantages of liquidity and settlement efficiency in the H share market.
The Zhitong Finance App learned that Minsheng Securities released a research report saying that bank AH share premiums are still at historically high levels. On the one hand, premiums are expected to subside with improved tax policy expectations and financial support. On the other hand, the discount on H shares also brings dividend advantages. At the same time, it is also necessary to consider the relative disadvantages of liquidity and settlement efficiency in the H share market.
In summary, Bank H Shares focus on: 1) China Construction Bank (00939): the dividend ratio is the highest among AH listed banks in circulation, with mainland investors accounting for 85% and sufficient capital; 2) ICBC (01398): the dividend rate and turnover ratio all rank in the top three among state-owned banks, mainland investors account for 51% and sufficient capital; 3) Chongqing Rural Commercial Bank (03618): The dividend rate after tax based on the stock price of May 17, 2024 ranks first among AH listed banks, with stable and sufficient capital Provisioning coverage rate at the end of 24Q1 was listed in AH Second in the line.
The following is a summary of the research report:
The dividend tax rate for bank H shares is not superior to A shares. Currently, there are 15 A+H listed banks in China (hereinafter referred to as “AH listed banks”). The dividend tax rate for A shares is related to the length of holding shares. Within 1 month, within 1 year, and 1 year or more, they are 20%, 10%, and 0%, respectively. The dividend tax rate for H shares is related to investment channels and types of investors. Hong Kong accounts are subject to a 10% tax rate, individuals and funds invest through Hong Kong Stock Connect, and enterprises are exempt from holding shares for 1 year or more through Hong Kong Stock Connect.
Under the high premium of AH shares, the dividend rate of bank H shares is still relatively high after tax deduction. As of May 17, 2024, the A shares of the 15 AH listed banks all had premiums over H shares. The average premium rate was 43%, which is still at a historically high level. Under the general discount of H shares, even through the Hong Kong Stock Connect channel with higher dividend tax, 10 AH listed banks still have higher dividend rates for H shares than for A shares. Participants in the Hong Kong region proposed a reduction in the Hong Kong Stock Connect dividend tax rate during the two sessions. If subsequent tax reduction policies are implemented, the dividend advantage of bank H shares will be further expanded.
In addition to dividends, factors such as liquidity should also be taken into account. On the one hand, it is mainly small and medium-sized banks that have high dividend rates for H shares at this stage, and the liquidity of their H shares is poor compared to large banks, and actual investment may face additional time costs and exchange rate risks due to poor transactions. On the other hand, due to investor structure and dividend settlement efficiency, the overall trading activity of bank H shares is weaker than that of A shares. The average daily turnover of A shares of 15 AH listed banks in the past year was 1.6 times that of H shares.
Bank H shares with high dividend value, active transactions, stable capital, and good management quality are preferred. From a dividend perspective, the dividend rate for H shares is high, the dividend ratio has stabilized at over 30% in the past three years, and CCB, ICBC, and Chongqing Agricultural Commercial Bank have sufficient capital. From a transaction perspective, agricultural banks, ICBC, and Chongqing Agricultural Commercial Bank have had high turnover rates in the past year. At the same time, attention should also be paid to CCB, which has a large market circulation of H shares. From a capital perspective, investors in mainland China have high shareholding ratios such as CCB, Everbright Bank, and ICBC. It is expected that their H share capital will be less affected by external shocks such as changes in overseas interest rates. From a fundamental perspective, CCB, Bank of Qingdao, and Chongqing Agricultural Commercial Bank have excellent performance, low defect rates, and high provision coverage in 24Q1.
Risk warning: macroeconomic fluctuations exceeded expectations; asset quality deteriorated; the decline in industry net interest spreads exceeded expectations.