Goldman Sachs: Second round of capital injections to strengthen capital preferences for China Construction Bank (00939) and Bank of China (03988)

The Zhitong Finance App learned that Goldman Sachs released a research report saying that the Industrial and Commercial Bank (01398) announced a private placement of 100 billion yuan of A-shares on September 6, the Ministry of Finance invested 70 billion yuan, and China Tobacco invested 30 billion yuan. The bank pointed out that since 2025, along with ICBC's announcement, the Ministry of Finance has injected capital into five major domestic banks (ICBC, CCB, Bank of China, Bank of China, Bank of China, Bank of China, Bank of China, Postbank), increasing the CET1 ratio by an average of 89 basis points during the year; the five major banks all raised their dividend payout ratios by 1 percentage point to 31% in the first half of 2026. The bank believes that the new round of capital injections will further strengthen the capital adequacy level of domestic banks and provide greater flexibility for future loan growth and shareholder returns.

The bank estimates that according to the static scenario of the average A-share price for 20 trading days up to September 4, ICBC's profit per share in 2026 will be diluted by about 3.5%, and the book value per share will be diluted by about 1.6%. Compared to the bank's forecast of a 5% compound annual increase in earnings per share and a 7% compound annual increase in book value per share from 2026 to 2028, the effects of dilution may be largely recovered through profit and book value growth in the next two years. The increase in the dividend ratio from 30% to 31% meant that the dividend per share increased by about 3%. The bank assumes that ICBC can maintain a 31% dividend ratio after the capital injection is completed, and the overall impact on minority shareholders is expected to be manageable. The final pricing reference date has yet to be determined, and management also indicated that if A-share prices fluctuate in the short term, premium pricing will be considered to protect existing shareholders.

The bank believes that while demand for credit is still weak, capital injection mainly strengthens balance sheet resilience, enhances loss absorption capacity, and provides options for future expansion rather than significantly speeding up loan growth; the four major banks that completed capital injections in 2025 have not accelerated significantly since then. The capital injection is led by the Ministry of Finance and is funded by special treasury bonds. At the same time, major banks raised dividends. The dividend rate is about 4% to 5%. Even after taking into account the impact of placement pricing, it is still about 3% to 4%, which is higher than the 10-year treasury bond yield of about 1.68%, which has positive long-term significance.

Goldman Sachs believes that this round of capital injections marks the final stage of capital replenishment for large banks, further strengthening the bank's constructive views on the industry; compared to small and medium-sized banks, large banks are expected to continue to hand over better operating performance. Among the large domestic banks, Goldman Sachs favors CCB (00939) and Bank of China (03988), with a rating of “buy”. The target prices for H shares are HK$10.1 and HK$5.96, respectively; regional banks prefer Bank of Ningbo (002142.SZ). Goldman Sachs gave ICBC a “neutral” rating, with a target price of HK$6.92 for H shares; for Postbank (01658), a target price of HK$5.76 for H shares; for Bank of Communications (03328), a target price of HK$6.39 for H shares.