The Analysis On Investment Value For Bank Of Communications

The reform and development of the securities market of China is advancing rapidly and the proportion of the institutional investors is continuously increasing, which promotes the securities investment to gradually become rationalized. The investors have paid more and more attention to the investment concept focusing on the investment value analysis of the listed companies. In this paper, the basic situation of the system of the Bank of Communications is analyzed to profoundly discuss the potential value of the company. Based on the annual reports, achievement issuing reports, financial reports and share price data of the Bank of Communications since 2004, some means and methods such as financial analysis, influencing factor analysis, achievement forecasting, comparison of the companies in the same industry, price earning ratio model etc. are used to carry out the comprehensive study of the basic situation of the Bank of Communications so as to make the scientific forecasting of the future achievements of the Bank of Communications and then select the rational price earning ratio to make the expected estimate and finally give the rational price of the Bank of Communications as well as provide the suggestions on investment for reference of the investors and potential investors of the Bank of Communications.I. Overview of the Company1. The Bank of Communications, with a long history, which is the first national State-owned joint-stock commercial bank of China, introduces HSBC, the strategic investor and is listed in both Hong Kong and Shanghai. The Bank of Communications is one of the top five commercial banks of China. The up-to-date statistics of the Banker show that the total assets of the Bank of Communications rank 69th and its core capital ranks 68th in the world Top 1000 banks, stably listed in the global Top 100 banks.2. The Bank of Communications, with the diversified stock right structure, has established the basic governing system of the modern company and basically established the company governing framework. It carries out the long-term encouragement plan of granting the stock appreciation in order to encourage the high-level management personnel of the company. It attaches great importance to the risk management and is continuously improving the management level.3. The strategic target of the Bank of Communications is to found the "international public bank, innovative bank, comprehensive bank, operation-intensive bank and bank with the advanced management" and the first-rate modern financial enterprise. The banking businesses are mainly divided into loan business, capital business and intermediate business according to the profit-making modes. They can also be divided into company business and retail business according to the different service objects.II. Financial Analysis of the CompanyWith the systematic analysis of the balance sheet, profit statement and statement of cash flow of the company, the Bank of Communications grasps the opportunity for development in the capital market and continuously and rapidly increases its total assets, gross liabilities and scale of rights and interests in 2007.The Bank of Communications has carried out a large amount of financing from the capital market for several times and continuously expanded its capital stock and scale of supreme loan bonds since 2004. With the rapid economic development of our country, all the liabilities of the Bank of Communications are also continuously and rapidly growing, but great changes occur to the liability composition, the proportion of the clients' deposits is decreased and the proportion of the deposits of the same industry and other financial institutions is rising because the growth of the stock market attracts a large amount of funds; however, a lot of money flowing to the stock market and funds is returned in the form of the deposits of the same industry.The situation of cash surplus of the Bank of Communications is caused because the loan business and the capital business that the interest earning assets support do not fully absorb the rapidly growing financing and liability funds of the capital market from 2004-2006.The Central Bank enhances the strength of increasing the legal required reserve rate and absorbs some of the funds of the Bank of Communications, and the scale of the national debts of the Ministry of Finance and the instruments of the Central Bank is greatly increasing, which promotes the increase of the securities investment of the Bank of China, absorbs some of the funds and promotes the great change to the assets structure of the Bank of Communications, the proportion of the securities investment is increased, the proportion of the loan is decreased and the cash balance is greatly reduced in 2007.The net interest income is rapidly increasing because the structural interest increasing of the Central Bank brings about the continuous increase of the loan interest rate, the Bank of Communications increases its own proportion of the long-term loan, increases the scale of securities investment and improves the fund utilization efficiency, etc. And, the Bank of Communications grasps the opportunities in the market, greatly increases its net service charges and commission income, much more than the growth rate of the net interest income and makes its proportion greatly increased so that the obvious change occurs to the income structure of the Bank of Communications, the proportion of the net service charges and commission income is increased and the proportion of the interest income is decreased.With the comprehensive analysis of the finance of the company, it is found that the company has the high rate of capital sufficiency and the assets return rate is stably increased, viewed from the profit making capability mainly because the proportion of the long-term loan is increased, the net interest difference and the net profit difference are continuously increased, the ratio of the depreciation loan is low, the appropriation coverage rate is high and there is space for rising of the proportion of deposits; therefore, the company has the great potential of growth.III. Stock Estimate of the Company1. With the analysis of the macroscopic influencing factors of operation of the Bank of Communications, the total trend of the external conditions for the operation is judged so as to provide the rational criteria for achievement forecasting. First, the Central Bank has to take the tight monetary policy and has increased the deposit reserve rate and the interests for many times since 2006 because the domestic economy has been in the rapid development for many consecutive years in the overheated state and the high net exports bring about the financial problem such as excess liquidity so that the CPI is continuously increasing, which is a big hidden trouble for the stable economic development. Second, the rapid development of the capital market of our country promotes the financial disintermediation to be accelerated and brings about the adjustment of the assets liability composition and the profit making structure of the banks. Finally, it brings the opportunities for study and cooperation to the domestic banks although the opening of the field of the domestic banks to the foreign investment intensifies the domestic competition.2. Based on the development trend of the macroscopic influencing factors and with the analysis of the microscopic factors of the income and cost of all the businesses of the Bank of Communications, the comprehensive forecasting of profit making of the Bank of Communications in the future two years is made. It is forecasted that the Bank of Communications will still maintain the high-speed growth in 2008 but the growth speed will be slowed down in 2009.3. With the analysis and comparison of the price earning ratios of the typical listed banks in the same industry, the rational price earning ratio of the Bank of Communications in the future two years is determined. Combined with the predicted value of the earning per share in the future, the expected estimate is made. Finally, predicted the value of the Bank of Communications will be 12.92 yuan to 2008,13.12 yuan to 2009.The rational price range is finally found for the investors of the Bank of Communications so that the scientific criteria are provided for the investors' decisions on investment in the paper.