It is one of the oldest banks in China having been first established back in 1908 to facilitate the re-acquisition of the Beijing-Hankou railway from Belgium. BoComm is one of the four oldest banks in the country and one of the earliest note issuers, making it an integral part of China’s financial history.
In China, the Bank of Communications operates over 2,900 banking outlets with 246 of those being domestic branches. In addition to its presence in China and Hong Kong, the Bank of Communications also has 23 overseas banking subsidiaries in markets like New York, Tokyo, Singapore, and London.
As a commercial bank, BoComm offers retail banking services to millions of Chinese citizens. These services include but are not limited to, personal banking, investing, loans, and insurance. On top of that, it also offers corporate banking services for businesses. The head office for the Bank of Communications is located in Shanghai, with other regional Chinese locations in Macau, Shenzhen, and Hong Kong.
Unlike the other big banks in China, the Bank of Communications does not live up to its namesake. It does not focus on providing services to the communications industry, unlike the Industrial and Commercial Bank of China (ICBC) or the Agricultural Bank of China, which have a heavy focus on industry and agriculture respectively. Instead, the Bank of Communications was named as such following its crucial role in re-acquiring the Beijing-Hankou railway. The word Communications is used to symbolize the railway linking two destinations via transportation.
As a commercial bank, BoComm offers retail banking services to millions of Chinese citizens. These services include but are not limited to, personal banking, investing, loans, and insurance. On top of that, it also offers corporate banking services for businesses. The head office for the Bank of Communications is located in Shanghai, with other regional Chinese locations in Macau, Shenzhen, and Hong Kong.
Unlike the other big banks in China, the Bank of Communications does not live up to its namesake. It does not focus on providing services to the communications industry, unlike the Industrial and Commercial Bank of China (ICBC) or the Agricultural Bank of China, which have a heavy focus on industry and agriculture respectively. Instead, the Bank of Communications was named as such following its crucial role in re-acquiring the Beijing-Hankou railway. The word Communications is used to symbolize the railway linking two destinations via transportation.
The Bank of Communications History
As mentioned, this bank has its roots leading all the way back to 1908. The idea of the Bank of Communications was brought forth by Liang Shiyi, a Chinese minister who would later go on to serve as the Premier of China in 1921 and 1922. Liang’s idea was to establish a national bank that could facilitate the repurchase of the Beijing-Hankou railway from the Belgians. When the bank was established in 1908, it provided more than half the financing that was required to re-acquire the railroad and place it back under China’s control.
Following this deal, the Bank of Communications would continue to operate in China until its expansion into Hong Kong in 1934. As with other major banks of the time, the Bank of Communications saw its business disrupted following the Chinese Civil War in 1949. Like the Bank of China, the Bank of Communications was divided, with part of the operations leaving China with the Kuomintang and establishing itself in Taiwan. This arm of the original Bank of Communications would later merge with the International Commercial Bank of China and be renamed the Mega International Commercial Bank after 1971.
The Bank of Communications as it is known today was re-established in 1987 by the Chinese State Council. At the time, this made the Bank of Communications the first ever state-owned shareholding commercial bank to operate in China. According to its own history page on its website, the Bank of Communications has established six major financial milestones in China.
These are:
Following this deal, the Bank of Communications would continue to operate in China until its expansion into Hong Kong in 1934. As with other major banks of the time, the Bank of Communications saw its business disrupted following the Chinese Civil War in 1949. Like the Bank of China, the Bank of Communications was divided, with part of the operations leaving China with the Kuomintang and establishing itself in Taiwan. This arm of the original Bank of Communications would later merge with the International Commercial Bank of China and be renamed the Mega International Commercial Bank after 1971.
The Bank of Communications as it is known today was re-established in 1987 by the Chinese State Council. At the time, this made the Bank of Communications the first ever state-owned shareholding commercial bank to operate in China. According to its own history page on its website, the Bank of Communications has established six major financial milestones in China.
These are:
- The first bank to implement a shareholding system for its capital and mode of ownership form;
- The first bank to establish an organizational structure based on market and cost/return rules;
- The first bank to introduce competition in the Chinese banking industry;
- The first bank to introduce asset/liability ratio management in identifying risk and business operations;
- The first bank to create new enterprise partnerships based on two-way selection;
- The first commercial bank to integrate banking, insurance, and securities.
It has been an influential bank in paving the way for financial reform in China. The Bank of Communications has a century-long reputation for being one of the strongest financial brands in the country and has a significant and well-respected presence in many overseas markets.
The Bank of Communications Stock
In 2005, the Bank of Communications went public and became the first Chinese commercial bank to be listed outside of China. The 2005 listing was in Hong Kong, while the listing on the Shanghai Stock Exchange did not come until 2007. As with the other big banks in China, this means that the Bank of Communications offers both A-Shares and H-Shares, depending on which market you trade. A-Shares are based on the Shanghai market and are much less liquid than H-Shares which are listed in Hong Kong.
The Bank of Communications has a much smaller market capitalization than its peers. As of October 2023, the Bank of Communications has a market cap of about USD $51.8 billion. This makes it roughly a third of the size of the Bank of China and the China Construction Bank, and about a quarter of the size of the Industrial and Commercial Bank of China and the Agricultural Bank of China. To compare it to a US bank, it has approximately the same value as US Bancorp.
The A-Shares trade in Shanghai under the ticker symbol SHA: 601328 and the H-Shares trade in Hong Kong under the ticker symbol HKSE: 3328. Neither stock has performed that well and both trade in the low single-digit price range, similar to other big banks in China. Much of the difference in performance for the stocks has to do with liquidity differences on each exchange as well as the foreign currency conversion for HK Dollars and Chinese Yuan. Since the IPO in Hong Kong in 2005, the H-Shares have provided returns of about 96% to shareholders. On the flip side, since the Shanghai IPO in 2007, the A-Shares have provided shareholders with a loss of 53%. The Bank of Communications struggles with a similar problem to many of the other big banks in China: an extremely high share count. The share float for the Bank of Communications is 26.89 billion shares.
Another factor to take into account is that the majority shareholder of each state-owned bank is the Chinese government. The Ministry of Finance in China owns about 25% of the company between its A-Shares and H-Shares holdings. The second-largest shareholder of the Bank of Communications is HSBC Bank which owns about 19% of the company. Insider ownership is higher than institutional ownership of the stock, which isn’t unusual for Chinese state-owned businesses.
The Bank of Communications has a much smaller market capitalization than its peers. As of October 2023, the Bank of Communications has a market cap of about USD $51.8 billion. This makes it roughly a third of the size of the Bank of China and the China Construction Bank, and about a quarter of the size of the Industrial and Commercial Bank of China and the Agricultural Bank of China. To compare it to a US bank, it has approximately the same value as US Bancorp.
The A-Shares trade in Shanghai under the ticker symbol SHA: 601328 and the H-Shares trade in Hong Kong under the ticker symbol HKSE: 3328. Neither stock has performed that well and both trade in the low single-digit price range, similar to other big banks in China. Much of the difference in performance for the stocks has to do with liquidity differences on each exchange as well as the foreign currency conversion for HK Dollars and Chinese Yuan. Since the IPO in Hong Kong in 2005, the H-Shares have provided returns of about 96% to shareholders. On the flip side, since the Shanghai IPO in 2007, the A-Shares have provided shareholders with a loss of 53%. The Bank of Communications struggles with a similar problem to many of the other big banks in China: an extremely high share count. The share float for the Bank of Communications is 26.89 billion shares.
Another factor to take into account is that the majority shareholder of each state-owned bank is the Chinese government. The Ministry of Finance in China owns about 25% of the company between its A-Shares and H-Shares holdings. The second-largest shareholder of the Bank of Communications is HSBC Bank which owns about 19% of the company. Insider ownership is higher than institutional ownership of the stock, which isn’t unusual for Chinese state-owned businesses.
The Bank of Communications Dividend
Despite the unspectacular performance of the stock, the Bank of Communications does pay a healthy dividend yield. For the A-Shares in Shanghai, the yield sits at 6.48%, while the H-Shares have a yield of 8.60%. The five-year average annual dividend yield sits at 7.52% for the H-Shares and 6.28% for the A-Shares. The Bank of Communications pays its dividends on an annual basis and has paid out distributions for 18 years since the stock debuted in Hong Kong.
The Bank of Communications seems to follow a similar dividend trend to its other big bank rivals in China. Consistent dividend growth varies from year-to-year and generally depends on how the business is performing. The current dividend growth rate for the Bank of Communications sits at about 9.24% over the past ten years and 5.85% annually over the previous five years.
One good thing about this bank is that the dividend payout ratio is quite low. The dividend payout ratio is a factor of how much of a company’s net earnings are paid out as distributions to shareholders. Currently, the H-Shares have a dividend payout ratio of about 26.83% which is quite reasonable. This is also an indication that the company can continue to pay and grow their dividends well into the future.
The Bank of Communications seems to follow a similar dividend trend to its other big bank rivals in China. Consistent dividend growth varies from year-to-year and generally depends on how the business is performing. The current dividend growth rate for the Bank of Communications sits at about 9.24% over the past ten years and 5.85% annually over the previous five years.
One good thing about this bank is that the dividend payout ratio is quite low. The dividend payout ratio is a factor of how much of a company’s net earnings are paid out as distributions to shareholders. Currently, the H-Shares have a dividend payout ratio of about 26.83% which is quite reasonable. This is also an indication that the company can continue to pay and grow their dividends well into the future.
The Bank of Communications Products and Services
As a commercial bank, the Bank of Communications provides its clients with a wide range of products and services. For retail customers, the bank offers all of the usual services including personal savings, investing, loans, and insurance. Banking services and investing are straightforward and are similar to how things are done in most countries.
For loans, the Bank of Communications offers a wide range of real estate mortgages that have flexible repayment and amortization for up to 30 years. Currency traders can also access over 10 different global currencies including Japanese Yen, US Dollars, and the Euro, through the bank’s forex services. This can be done either in person at a branch or via internet banking.
As with most other banks in China, the Bank of Communications does offer mobile banking including integration with platforms like WeChat and Alipay. There is also a mobile app as well as SMS banking for users who prefer to bank on the go with their smartphones.
Businesses can sign up for corporate banking with the Bank of Communications, with many of the same options as consumer banking. Corporate-only services include import/export trade services and business-specific loans like syndicated financing or a guarantee and performance bond.
The Bank of Communications also offers faster incoming and outgoing remittance services for businesses. It also provides direct transfers between business and personal bank accounts and similar savings and investing options.
For loans, the Bank of Communications offers a wide range of real estate mortgages that have flexible repayment and amortization for up to 30 years. Currency traders can also access over 10 different global currencies including Japanese Yen, US Dollars, and the Euro, through the bank’s forex services. This can be done either in person at a branch or via internet banking.
As with most other banks in China, the Bank of Communications does offer mobile banking including integration with platforms like WeChat and Alipay. There is also a mobile app as well as SMS banking for users who prefer to bank on the go with their smartphones.
Businesses can sign up for corporate banking with the Bank of Communications, with many of the same options as consumer banking. Corporate-only services include import/export trade services and business-specific loans like syndicated financing or a guarantee and performance bond.
The Bank of Communications also offers faster incoming and outgoing remittance services for businesses. It also provides direct transfers between business and personal bank accounts and similar savings and investing options.
What Does the Future Hold for the Bank of Communications?
Is the Bank of Communications going anywhere in China? Absolutely not. But does this make the stock a good long-term investment? That remains to be seen. As for most businesses in China, the current state of the economy and slower-than-expected growth rates are troublesome, especially for banks. There are also some serious concerns when it comes to the real estate development industry and the rebound of industry and manufacturing.
China has recovered at a much slower rate than most other major markets. This could be due to the fact that it was also the hardest-hit economy during the COVID-19 pandemic. Inflation has been sticky in China and the government has been discussing potential stimulus for the economy. A recession would be damaging to Chinese businesses especially Chinese banks.
On the bright side, Chinese bank stocks trade at such low multiples that the prices of the stocks can’t go much lower. There is an added layer of security considering that the majority shareholders of state-owned banks are the Chinese government. This might turn some investors off from investing in Chinese banks, but as far as safety goes, it is unlikely any of these banks will ever fall into bankruptcy.
The Bank of Communications also pays out a solid dividend yield although some investors may not like the annual distribution frequency. American investors are accustomed to quarterly distributions but many markets around the world pay them out less frequently. The dividend payout ratio and consistency of distributions are both positives if you are considering adding the Bank of Communications to your portfolio.
Chinese banks are not exciting stocks to own but they can provide some stability while you collect an annual dividend payout. The Bank of Communications has a long history and reputation in China and does not have a track record for negative headlines. Other positives for this bank include a strong international presence in most major financial hubs around the world. Like other Chinese bank stocks, there is nothing sexy about the Bank of Communications but with a massively growing middle class in China, you can own one of the largest banks in the country for the long term.
China has recovered at a much slower rate than most other major markets. This could be due to the fact that it was also the hardest-hit economy during the COVID-19 pandemic. Inflation has been sticky in China and the government has been discussing potential stimulus for the economy. A recession would be damaging to Chinese businesses especially Chinese banks.
On the bright side, Chinese bank stocks trade at such low multiples that the prices of the stocks can’t go much lower. There is an added layer of security considering that the majority shareholders of state-owned banks are the Chinese government. This might turn some investors off from investing in Chinese banks, but as far as safety goes, it is unlikely any of these banks will ever fall into bankruptcy.
The Bank of Communications also pays out a solid dividend yield although some investors may not like the annual distribution frequency. American investors are accustomed to quarterly distributions but many markets around the world pay them out less frequently. The dividend payout ratio and consistency of distributions are both positives if you are considering adding the Bank of Communications to your portfolio.
Chinese banks are not exciting stocks to own but they can provide some stability while you collect an annual dividend payout. The Bank of Communications has a long history and reputation in China and does not have a track record for negative headlines. Other positives for this bank include a strong international presence in most major financial hubs around the world. Like other Chinese bank stocks, there is nothing sexy about the Bank of Communications but with a massively growing middle class in China, you can own one of the largest banks in the country for the long term.