In the early years, I heard that China Merchants Bank is the leader of my country’s private banks, and it is a model, but I don’t know how good China Merchants Bank is. When I studied monetary finance before, I probably had an understanding of the operation of my country’s banking industry, and I knew how the banking industry works. Yes, what role does the central bank play? Today, I want to use what I have learned to estimate the value of China Merchants Bank, and see how much return can I get if I hold China Merchants Bank in my current position?
The main business of China Merchants Bank is retail financial business, which is to handle deposit and loan business for self-employed individuals. For example, the money we usually go to the bank for deposit and loan settlement is attributed to it; wholesale financial business refers to business for enterprises and institutions. From ROE=operating net interest rate*total asset turnover rate*equity multiplier, we can disassemble to see what factors affect the bank’s ROE
I have listed the ROE dismantling data for nearly 7 years and found that the ROE of China Merchants Bank has basically remained unchanged. It was 17.09% in 2015 and will remain at 16.96% in 2021. As long as there are no major policies, I estimate that this figure will not be the same in the future. There will be too many changes. And one important point is that it seems that the profitability of China Merchants Bank has not improved, but in fact, China Merchants Bank is gradually reducing its leverage. The equity multiplier has dropped from 15.13 times in 2015 to 10.68 times in 2021, which is equivalent to your original The debt of 14 yuan has to be repaid. As you operate, you only need to repay 9.68 yuan now, and your profit level is still the same as before. Look at the operating net interest rate of China Merchants Bank, and its operating net interest rate has been increasing. Increase, this figure is approaching the bottleneck. I think that with the operating net profit margin remaining at this figure, China Merchants Bank’s appropriate increase in leverage can bring about a huge increase in ROE, but due to policy restrictions, we cannot arbitrarily increase leverage.
Then from the historical data, we can assume that the ROE of China Merchants Bank has remained unchanged, taking 17% as the ROE, and the growth rate = b*ROE+ROE growth rate.
In the end we can get the average growth rate for the past 7 years – 11.4%
The average PB of banks in the past 5 years is 0.79, while the lowest PB of China Merchants Bank in the past 5 years is 0.86, so here I use 0.86 as the limit P/B ratio of China Merchants Bank
According to the relative valuation method, the capital gain rate of China Merchants Bank after five years of holding is 50.86%, the dividend return rate is 33.58%, and the total return rate is about 84.44%, and the annualized rate of return is about 13%.
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