China's Small Banks Trade at Deep Discount Against ICBC

Shares of China’s smaller national banks including China Minsheng Banking Corp. and China Citic Bank Corp. are trading at, or near, record discounts against their largest peer, in terms of price-to-book ratios. The gap may widen further as the nation’s campaign against financial leverage cuts into the profitability of small banks, which are more reliant on interbank borrowings for funding. Some lenders’ return on equity may decline by as much as 10 percent due to the tighter liquidity, according to BOCOM International Holdings Co.

— With assistance by Jun Luo

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