asia pacific: banks -...

August 12, 2016

Asia Pacific: Banks

Equity Research

Asia financials’ high dividend yields – Illusion or opportunity?

The chase for yield looks here to stay

Real bond yields are currently zero or negative in

most developed markets. Banks appear to have

been left behind in the chase for yield with bank

dividend yields exceeding both bond yields and

non-bank yields in most markets, and this spread

has widened. While higher US rates could see the

return of volatility for yield stocks, the ‘taper

tantrum’ of mid-2013 highlighted that high

dividend yield stocks still outperformed low

yielding stocks during this period.

EPS growth risks but offsets from banks managing asset growth and capital clarity

Regulatory forces have seen banks de-lever

globally, but EU/US stress tests suggest capital

builds are nearly done and Asian banks are

already above global peers. Asset quality shocks

are a risk to dividends via EPS downgrades and

increases in risk weighted asset intensity (i.e.

“RWA migration”), but we believe investors often

underestimate the cushioning impact to dividend

volatility that: 1) lower volumes would likely have

in such a scenario and 2) banks have via

managing targeted RWA run-off.

Our dividend yield scorecard: HSBC and ABC screen best

We screen the top/bottom 30 yielding stocks in

our Asia Pacific Banks coverage universe for other

metrics including:

Forecast EPS growth (EPS growth is a cushion

for dividend growth)

FX volatility vs USD (lower is better)

Payout ratios (lower is better)

Dividend volatility (lower is better)

Dividend yield spread versus bond yields

(banks more attractive versus bonds)

While we have not included capital as part of the

screen due to differing capital requirements, in

general this appears to be a subsiding risk for

bank dividend payments. Stocks with a high

dividend yield that screen best on our scorecard

metrics and that we rate Buy: HSBC and

Agricultural Bank of China (H). Stocks that screen

poorly (low dividend yield, low EPS growth, etc.)

and that we rate Sell: Punjab National Bank, Bank

of Baroda, and Bank of East Asia.

RELATED RESEARCH

HSBC: A new phase: moving towards higher capital return;

reiterate Buy, August 8, 2016

India Financial Services: Credit cycle at inflection point,

August 3, 2016

Europe: Banks: Stress Test: Worst fears avoided; capital

divergence widens, July 31, 2016

Australia: Portfolio Strategy Research: Divided on

Dividends, July 27, 2016

Europe: Banks: Receding regulatory risk as EU Council

weighs in on Basel-4 debate, July 13, 2016

China: Banks: Southbound Connect: What & Why; Bank

shares are benefiting, July 5, 2016

Australia: Banks: Commentary: APRA notes improvement in

major banks' capital ratios, July 4, 2016

United States: Banks: Stress Test 2016, June 24, 2016

Ben Koo +65-6889-2483 [email protected] Goldman Sachs (Singapore) Pte Goldman Sachs does and seeks to do business with companies

covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.

Andrew Lyons +61(2)9321-8543 [email protected] Goldman Sachs Australia Pty Ltd Sania Ruziqa +65-6654-5440 [email protected] Goldman Sachs (Singapore) Pte

Gurpreet Singh Sahi, CFA +852-2978-1287 [email protected] Goldman Sachs (Asia) L.L.C.

The Goldman Sachs Group, Inc. Global Investment Research

August 12, 2016 Asia Pacific: Banks

Goldman Sachs Global Investment Research 2

Table of contents

Introducing our dividend yield scorecard: Top/Bottom 30 yielding stocks 3

Why the chase for yield is unlikely to go away 5

High yield bank stocks have historically behaved more defensively when US rates surprise 6

Bank stocks have fallen behind non-banks in the chase for yield 7

Dividend risks: More cushioning than meets the eye? 10

HSBC and ABC (H) top our yield screen among Buy-rated names; PNB is at the bottom of our Sell-rated yield names 15

Company snapshots 16

HSBC Holdings (0005.HK): A new phase of higher capital returns; reiterate Buy 17

ABC (1288.HK): Highest div yield & implied NPL ratio among China banks; reiterate Buy 19

Punjab National Bank (PNBK.BO): Profitability to remain under pressure; maintain Sell 21

Appendix: Dividend yield score card charts 24

Disclosure Appendix 31

Prices in this report are as of August 10, 2016, unless stated otherwise.

Asia Financials Research Team

Name Tel E-mail Location Name Tel E-mail LocationRegional JapanAndrew Lyons 612-9321-8543 [email protected] Sydney Katsunori Tanaka 813-6437-9973 [email protected] TokyoBen Koo 65 6889 2483 [email protected] Singapore Taichi Noda 813-6437-9834 [email protected] TokyoAchsania Ruziqa 65-6654-5440 [email protected] Singapore Masayuki Takii 813-6437-9931 [email protected] TokyoChina Taiki Okada 813-6437-9917 [email protected] TokyoNan Li 86-10-6627-3021 [email protected] Beijing Masatomo Okawa 65-6654-5430 [email protected] TokyoJessica Wu 86-10-6627-3487 [email protected] Beijing ASEANShuo Yang 86-10-6627-3463 [email protected] Beijing Ben Koo 65 6889 2483 [email protected] SingaporeLucy Li 65-6654-5426 [email protected] Singapore Melissa Kuang, CFA 65-6889-2869 [email protected] SingaporeWendy Chen 65-6654-5218 [email protected] Singapore Nicholas Umar 65-6889-2492 [email protected] SingaporeKatherine Liu 65-6654-5419 [email protected] Singapore Max Jelatianranat 65-6654-5540 [email protected] SingaporeHong Kong / Exchanges IndiaGurpreet Singh Sahi, CFA 852-2978-1287 [email protected] Hong Kong Rahul Jain 91-22-6616-9161 [email protected] MumbaiMancy Sun 852-2978-6072 [email protected] Hong Kong Mayank Bukrediwala 91-22-6616-9169 [email protected] MumbaiThomas Wang 852-2978-1697 [email protected] Hong Kong Himank Jain 91-80-6637-8178 [email protected] BengaluruJonathan Lim 852-2978-0037 [email protected] Hong KongTianbo Yu 65-6654-4590 [email protected] Singapore TaiwanAustralia Vincent Chang 886-2-2730-4182 [email protected] TaipeiAndrew Lyons 612-9321-8543 [email protected] Sydney Jerry Lin 65-6654-5887 [email protected] SingaporeAshley Dalziell 612-9321-8999 [email protected] Sydney KoreaIngrid Groer 612-9321-8563 [email protected] Sydney Seung Kyu Shim 822-3788-1778 [email protected] SeoulYuChuan Leong 612-9321-8533 [email protected] Sydney Kim Hayeon 822-3788-1704 [email protected] Seoul



Introducing our dividend yield scorecard: Top/Bottom 30 yielding stocks

In addition to dividend yields, we screen the Top 30 yielding stocks in our Asia Banks coverage (92 stocks) for other favorable metrics

including EPS growth (higher EPSg supports future DPSg), FX volatility (lower volatility vs USD is preferable), payout ratio (lower

payouts provide flexibility/cushioning), dividend volatility (lower implies more predictable earnings streams) and dividend yield vs

bond yield (higher is more attractive vs holding a bond for retail investors). Further details on our scorecard metrics are provided in

the Appendix.

Buy-rated names among those stocks that screen best on our scorecard metrics are HSBC and Agricultural Bank of China (H).

Exhibit 1: Top 30 dividend yield stocks (sorted by average score)

Notes: *Denotes stock is on our regional Conviction List. Further details on our scorecard metrics are provided in the Appendix.

Source: Bloomberg, Goldman Sachs Global Investment Research.

8/10/2016

Top 30 Dividend Yield Stocks (sorted by avg score)

Rank Company Country RatingPrice

10-Aug-2016Div YieldFY17E

FY15-18 EPSg1=high, 4=low

FX Volatility1=low, 4=high

Payout Ratio1=low, 4=high

Div - Bond Yield1=high, 4=low

Dividend growth Volatility, 1=low, 4 =

HighAverage Score

1 Chongqing Rural Commercial Bank China Neutral HK$ 4.25 4.7% 1 1 1 3 3 1.82 HSBC Holdings Hong Kong Buy HK$ 54.75 7.2% 2 1 4 1 2 2.03 Bank of Chongqing China Neutral HK$ 5.98 5.5% 1 1 2 2 4 2.04 China Merchants Bank (H) China Neutral HK$ 17.5 5.2% 2 1 2 2 3 2.05 Agricultural Bank of China (H) China Buy HK$ 2.97 6.5% 4 1 3 1 2 2.26 Mega Financial Holdings Taiwan Neutral NT$ 25.9 6.2% 2 1 4 1 3 2.27 China CITIC Bank (H) China Buy* HK$ 5.04 5.5% 2 1 2 2 4 2.28 Krung Thai Bank Thailand Neutral Bt 18.1 5.5% 2 2 4 1 2 2.29 Bank of China (H) China Neutral HK$ 3.3 6.1% 4 1 3 1 3 2.410 Bank of Communications (H) China Neutral HK$ 5.53 5.8% 3 1 3 2 3 2.411 Hang Seng Bank Hong Kong Neutral HK$ 134.6 5.6% 4 1 4 1 2 2.412 China Construction Bank (A) China Buy Rmb 5.11 5.2% 3 1 3 2 3 2.413 Agricultural Bank of China (A) China Neutral Rmb 3.14 5.2% 4 1 3 2 2 2.414 Bank of China (A) China Sell Rmb 3.35 5.1% 3 1 3 2 3 2.415 Bank of Communications (A) China Neutral Rmb 5.65 4.9% 3 1 3 2 3 2.416 Sumitomo Mitsui Financial Group Japan Buy* ¥ 3399 4.7% 3 4 2 1 2 2.417 Woori Bank South Korea Sell W 10350 4.6% 3 3 3 2 1 2.418 Bank of Queensland Ltd. Australia Neutral A$ 10.7 7.1% 3 4 4 1 1 2.619 Westpac Banking Corp. Australia Neutral A$ 30.81 6.1% 3 4 4 1 1 2.620 ICBC (H) China Buy HK$ 4.64 5.8% 3 1 3 2 4 2.621 Commonwealth Bank of Australia Australia Neutral A$ 77.4 5.4% 3 4 4 1 1 2.622 ICBC (A) China Buy Rmb 4.38 5.3% 3 1 3 2 4 2.623 Industrial Bank of Korea South Korea Neutral W 11700 4.6% 2 3 2 2 4 2.624 National Australia Bank Australia Neutral A$ 26.83 6.7% 4 4 4 1 1 2.825 ANZ Banking Group Australia Buy* A$ 26.75 6.0% 4 4 4 1 1 2.826 Bendigo and Adelaide Bank Ltd. Australia Sell A$ 10.57 5.9% 4 4 4 1 1 2.827 China Construction Bank (H) China Buy HK$ 5.54 5.6% 4 1 3 2 4 2.828 Aozora Bank Japan Buy ¥ 349 5.4% 1 4 4 1 4 2.829 CIMB Group Holdings Malaysia Buy RM 4.49 4.9% 1 4 4 3 3 3.030 Malayan Banking Bhd Malaysia Neutral RM 7.95 6.8% 2 4 4 2 4 3.2

Top 10 Dividend Yield 2017E

1 2 3 4 5



Conversely, low dividend yield stocks in our coverage universe with low EPS growth, high FX volatility, high payout ratios, high

dividend volatility and low yields versus bonds look less appealing for investors.

Sell-rated names in our Bottom 30 dividend yield stock list which screen least favorably on our scorecard metrics are Punjab

National Bank, Bank of Baroda, and Bank of East Asia.

Exhibit 2: Bottom 30 dividend yield stocks (sorted by average score)

Notes: *Denotes stock is on our regional Conviction List. Further details on our scorecard metrics are provided in the Appendix.


Bottom 30 Dividend Yield

Rank Company Country RatingPrice

10-Aug-2016Div YieldFY17E

FY15-18 EPSg1=high, 4=low

FX Volatility1=low, 4=high

Payout Ratio1=low, 4=high

Div - Bond Yield1=high, 4=low

Dividend growth Volatility, 1=low, 4 =

HighAverage Score

1 Punjab National Bank India Sell Rs 119.75 0.0% 4 3 1 4 3 3.02 Chang Hwa Commercial Bank Taiwan Neutral NT$ 16.5 2.6% 4 1 3 3 4 3.03 Bank Mandiri Indonesia Neutral Rp 11550 2.6% 1 3 3 4 4 3.04 KB Financial Group South Korea Buy W 37900 2.9% 3 3 2 3 4 3.05 Shinsei Bank Japan Buy ¥ 154 0.6% 4 4 1 3 2 2.86 Bank of Baroda India Sell Rs 160.3 1.9% 2 3 2 4 3 2.87 ICICI Bank India Neutral Rs 239.3 1.9% 3 3 2 4 2 2.88 Bank of East Asia Hong Kong Sell HK$ 32.95 1.9% 3 1 4 3 3 2.89 Dah Sing Banking Group Hong Kong Neutral HK$ 14.96 2.1% 4 1 2 3 3 2.610 BNK Financial Group South Korea Neutral W 8910 2.2% 4 3 1 3 2 2.611 CTBC Financial Holdings Taiwan Neutral NT$ 18 2.4% 4 1 2 3 3 2.612 Suruga Bank Japan Sell ¥ 2344 0.4% 2 4 1 3 2 2.413 State Bank of India India Buy Rs 231.5 1.1% 2 3 1 4 2 2.414 BDO Unibank Philippines Neutral P 119.5 1.9% 1 2 2 4 3 2.415 Bank Tabungan Negara Indonesia Neutral Rp 1945 2.4% 1 3 1 4 3 2.416 Hana Financial Group South Korea Neutral W 29050 2.5% 1 3 1 3 4 2.417 Shizuoka Bank Japan Sell ¥ 788 2.5% 3 4 2 2 1 2.418 Chiba Bank Japan Neutral ¥ 562 2.7% 4 4 1 2 1 2.419 Bank Rakyat Indonesia Indonesia Neutral Rp 12000 2.9% 1 3 2 4 2 2.420 Kotak Mahindra Bank India Neutral Rs 760.7 0.1% 1 3 1 4 2 2.221 Yes Bank India Buy* Rs 1264.8 1.1% 1 3 1 4 2 2.222 Ping An Bank Co. China Neutral Rmb 9.14 1.9% 1 1 1 4 4 2.223 E.Sun Financial Holding Taiwan Neutral NT$ 18.1 2.3% 2 1 2 3 3 2.224 Bank Of Nanjing China Neutral Rmb 10.32 2.7% 1 1 1 4 4 2.225 IndusInd Bank India Neutral Rs 1158.5 0.7% 1 3 1 4 1 2.026 Axis Bank India Buy Rs 567.05 0.9% 1 3 1 4 1 2.027 HDFC Bank India Buy Rs 1229.45 1.0% 1 3 1 4 1 2.028 Metropolitan Bank and Trust Co Philippines Neutral P 93.35 1.1% 1 2 1 4 2 2.029 Bank Central Asia Indonesia Neutral Rp 14950 1.4% 1 3 1 4 1 2.030 Kasikornbank Thailand Neutral Bt 200 2.8% 1 2 2 3 1 1.8

Bottom 10 Div Yield FY17E

1 2 3 4 5



Why the chase for yield is unlikely to go away

Bond yields have been on a downward march over the past decade and after adjusting for inflation are now flat/negative across

most of developed Asia (Exhibits 3 and 4). Additionally, some DM countries in Asia have seen higher FX volatility over the period.

Falling yields is now leading to a return of interest in dividend funds.

Exhibit 3: 10-year bond yields have compressed over the past decade

Exhibit 4: Real bond yields are currently flat/negative in developed Asia (ex-

Singapore)

Source: Bloomberg


Exhibit 5: FX volatility has been high, particularly in some DM countries Exhibit 6: Interest in dividend funds has risen in recent months

Note: Data based on average monthly change from July 2011-July 2016.

Source: Bloomberg

Source: EPFR

(1)

-

1

2

3

4

5

6

7

Mar

-07

Sep-

07

Mar

-08

Sep-

08

Mar

-09

Sep-

09

Mar

-10

Sep-

10

Mar

-11

Sep-

11

Mar

-12

Sep-

12

Mar

-13

Sep-

13

Mar

-14

Sep-

14

Mar

-15

Sep-

15

Mar

-16

Australia Hong Kong Japan South Korea Singapore

10Y Bond Yield (%)

(2) (1)

- 1 2 3 4 5 6 7 8

Indi

a

Indo

nesi

a

Phili

ppin

es

Mal

aysi

a

Chi

na

Thai

land

Aus

tral

ia

Sing

apor

e

Sout

h K

orea

Hon

g K

ong

Taiw

an

Japa

n

10yr Bond 10yr Bond less Infl. Exp.

(%)EM Asia still positive real yields

DM Asia flat/negative real yields (ex-Sing)

2.8 2.72.6

2.42.3 2.2

1.5 1.4 1.41.2

0.7

0.1 -

0.5

1.0

1.5

2.0

2.5

3.0

Japa

n

Aus

tral

ia

Mal

aysi

a

Indo

nesi

a

Indi

a

Sou

th K

orea

Thai

land

Sin

gapo

re

Phi

lippi

nes

Taiw

an

Chi

na

Hon

g K

ong

Std Dev of monthly change in FX vs USD (%)

-6

-5

-4

-3

-2

-1

0

1

2

Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

Dividend Funds Inflows/Outflows (US$bn)



High yield bank stocks have historically behaved more defensively when US rates surprise

During mid-2013, the “taper-tantrum” saw most bank stocks globally sold off aggressively. Despite this sell-off, a portfolio of the

Top 30 high yield stocks in FY12 would have outperformed the Bottom 30 yielding stocks, i.e. yield stocks were more defensive.

Exhibit 7: The Top 30 dividend yield stocks outperformed the Bottom 30 yielding stocks through the mid-2013 “taper-tantrum”

Performance of the Top 30 and Bottom 30 dividend yield stocks in the Asia Financials sector in FY12

Source: Datastream, Company data.

80

85

90

95

100

105

110

115

Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14

30 Highest Dividend Yield stocks 30 Lowest Dividend Yield Stocks

100 = Dec 2012



Bank stocks have fallen behind non-banks in the chase for yield

Despite the fall in bond yields over the past one year, bank dividend yields have failed to keep pace with the degree of compression.

As such, bank dividend yield spreads versus bond yields have widened, particularly in developed Asia (Exhibits 8 and 9). Compared

to local market indexes, bank yields are also now above the average dividend yield of the local indexes for nearly all countries in

Asia and this premium has widened on average across Asia over the past two years (Exhibits 10 and 11).

Exhibit 8: Own a bank stock or own a bond? DM bank yields look more

attractive

Exhibit 9: EM bank dividend yields show a mixed story



Exhibit 10: DM bank yields are now above their local market index

Exhibit 11: EM banks are now also mostly above the local market index



Japan

KoreaSingapore

TaiwanAustralia

HongKong

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Dividend Yield - 10 YR Bond yield: Developed Asia

China

IndiaIndonesia

Malaysia

Thailand

Philippines

-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Dividend Yield - 10YR Bond Yield: Emerging Asia

Japan

Korea

Singapore

Taiwan

Australia

HongKong

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Banking Dividend Yield vs Local Index Yield (Developed Asia)

China

India

Indonesia

Malaysia

Thailand

Philippines

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Banking Dividend Yield vs Local Index Yield :Emerging Asia



Compared to other typical yield stocks, banks also now look more attractive versus history

Yield investors typically compare banks to telcos and REITs. Compared to telcos, banking sector dividend yields are now higher

than those on offer in the telco sector for China, Australia, Indonesia, Japan, Korea, India and Malaysia (Exhibit 12) and this

premium has widened versus the average of the past three years.

Compared to REITS, banking sector dividend yields are higher in Korea and Australia (Exhibit 13) and in most countries this yield

differential has improved in favor of banks versus the average of the past three years. In Australia, the presence of franking credits

for bank dividends (i.e. corporate tax already paid), but not REITS, makes this differential even more stark.

Exhibit 12: Bank yield spreads have improved versus telcos in all countries

Bank versus telco dividend yield – FY16E vs 3-year historic average (%)

Exhibit 13: Bank yield spreads have also improved versus REITs in most cases

Bank dividend yield versus REIT yield – FY16E vs 3-year historic average (%)



Relative to the rest of the world, Asia capital returns are still low when including buy-backs

Dividends provide income for investors, while buy-backs aide future EPS growth. While some markets in Asia appear to have very

high dividend payout ratios, our Portfolio Strategy team recently highlighted in their note “Divided on Dividends” (July 27, 2016)

that when including buy-backs markets like the US are returning significantly more cash than high dividend payout markets like

Australia (see Exhibit 14). Overall, the effective payout ratios (including buy-backs) in Asia are still well below the levels seen

globally and by banks (see Exhibits 15 and 16).

2.4

1.7 1.7

-0.2-0.5

0.6

-0.5

-1.1

-1.5

-3.1

-1.9

-3.4

2.52.3

1.31.0

0.5 0.4 0.2

-0.6 -0.7

-1.5 -1.5

-2.7

China Australia Indonesia Japan Korea India Malaysia HongKong Singapore Thailand Taiwan Philippines

Average FY12-15 FY16ESpread (Average Bank Yield vs Telco Yield )

-1.0

-0.3

-1.8

-2.9

-1.6

-2.9 -2.8

-1.9

-4.8-4.3

1.61.2

-0.3

-2.0 -2.2 -2.3-2.7

-3.3

-5.3-5.7

Korea Australia Japan Malaysia HongKong Thailand Singapore China Indonesia India

Average FY12-15 FY16ESpread (Average Bank Yield vs REIT Yield )



Exhibit 14: Payout ratios of Australian firms don’t look that bad when compared to the global market Dividends and buy-back as % of FCF for major equity markets

Source: Bloomberg, FactSet, Goldman Sachs Global Investment Research

Exhibit 15: Capital returns in Asia are generally at the low end versus the

global market Dividend and buy-back as % of FCF for MSCI All Country Index, FY15

Exhibit 16: Bank capital returns in Asia are relatively lower than non-banks Dividend and buy-back as % of FCF for bank and non-banks in the MSCI All

Country Index, FY15

Source: Bloomberg, MSCI

Source: Bloomberg, MSCI

85 83

7369 68 67

4944 43 42

3023

0

10

20

30

40

50

60

70

80

90

Cap

ital

man

agem

ent

as %

of

FCF

In FY15 ASX 200 firms paid-out 73% of FCF via dividends...

6761

42 4235

20 18 1713 13 11

60

10

20

30

40

50

60

70

80 ...But only 11% via Buy-Backs...

68

8569

44

8373 67

4942

30 23

49

67 35

42

61

13

116

1320

1817

43

135

120

111104

96

83

73

62 62

4840

92

0

20

40

60

80

100

120

140

160 ...In aggregate Australian Firms returned less cash than the global

average

Buy-Back as % of FCF

Dividends % of FCF

75 8065

55 60 57 53

3252 48

3038

12 3

9 1 1 5

241

18 3

8883

65 64 61 58 58 56 52 49 4841

Australia Malaysia India Singapore Philippines Indonesia HongKong

Korea Thailand Taiwan Japan China

Dividends % of FCF Buy-Back as % of FCF

58%

86%

32%

30% 46

%

115%

40% 56

%

39% 49

%

28%

76%

34%

63%

31% 49

%

29%

72%

30%

32%

26%

93%

26%

91%

67

101

4748

47

122

41

61

4050

39

84

34

64

31

57

30

72

30

59

26

93

26

93Ba

nkNo

n Ba

nk

Bank

Non

Bank

Bank

Non

Bank

Bank

Non

Bank

Bank

Non

Bank

Bank

Non

Bank

Bank

Non

Bank

Bank

Non

Bank

Bank

Non

Bank

Bank

Non

Bank

Bank

Non

Bank

Bank

Non

Bank

AUS JPN MYS HKG TWN SGP THA CHN PHL KOR IND IDN

Dividends % of FCF Buy-Back as % of FCF

Note: Bubble Represents Total Payout Ratio



Dividend risks: More cushioning than meets the eye?

Bank dividends are dependent on three factors: earnings/profits, capital requirements and asset growth. While earnings risks have

been top of investor minds given macro uncertainties, managing asset growth should help banks accumulate capital faster and

therefore facilitate higher payout ratios. The chase for higher capital ratios globally also seems to be subsiding and current reported

capital ratios of the Asia banks are already high by global standards.

Some cushioning against earnings risks despite decline in profitability

Profitability has been declining in most Asian banking markets over the past five years as a slowdown in global growth has created

revenue pressures, particularly for DM banks, and asset quality issues, particularly for EM banks (see Exhibits 17 and 18). While

recent bank results have shown signs of stabilization/improvement in asset quality in some EM bank markets (e.g. Indonesia and

Thailand), investors are likely to remain concerned about earnings risks in some DM banks given lower rates and growth.

Exhibit 17: DM Asia bank ROAs have generally declined due to revenue

pressures…

Exhibit 18: …while EM Asia bank ROAs have largely been impacted due to

asset quality pressures

Source: Company data, Goldman Sachs Global Investment Research.


That said, our forecasts already factor in a higher level of credit costs / pre-provision profits for most banking markets we cover, with

Korean and Philippine banks the exception (see Exhibit 19). Additionally, while the payout ratio for Australian banks in FY17E is

already high, credit costs / pre-provision profits still looks low, thus providing some earnings buffers for higher credit costs but less

flexibility for maintaining dividends (see Exhibit 20).

Japan

Korea

Singapore

TaiwanAustralia

HongKong

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2010 2011 2012 2013 2014 2015 2016E

Japan Korea Singapore Taiwan Australia HongKong

ROA in Developed Asia

China

India

Indonesia

Malaysia

Thailand

Philippines

0.5

1.0

1.5

2.0

2.5

3.0

2010 2011 2012 2013 2014 2015 2016E

China India Indonesia Malaysia Thailand Philippines

ROA in Emerging Asia



Exhibit 19: We factor in higher credit cost / PPOP for most of our Asia banks

coverage, and DM banks are generally low on this ratio

Exhibit 20: Australian banks are relatively low on credit costs / PPOP, but the

payout ratio is high, suggesting less dividend cushioning for any rise in credit

costs


Source: Goldman Sachs Global Investment Research.

Earnings hits could be absorbed by higher payouts; RWA migration the bigger risk

Under a 10% earnings hit scenario, we estimate that dividends can be maintained via payout ratios increasing between 3%-9%, with

only a small reduction to CET1 ratios (by 11bps in our example for a 10% ROE bank). The bigger unknown is downgrades to loan

books which in turn could result in an increase in risk weighted assets (i.e. “RWA migration”). Based on our analysis, a 10%

earnings hit with a 1% increase in RWAs would cause the CET1 ratio to fall 22bps, so 2x the impact of just looking at profits. Banks

typically manage RWA migration in bad times by shedding low margin business, asset sales and withdrawing undrawn credit lines

(e.g. HSBC’s announced reduction of US$48bn of RWAs in 1H16), but this tends to be difficult when there are rapid changes to asset

quality as was the case at the start of the global financial crisis (GFC).

Exhibit 21: Scenario analysis to maintain dividends


0

5

10

15

20

25

30

35

40

45

50

IND KOR CHN THA IDN SGP MYS TWN PHL AUS JPN HKG

Avg FY12-15 Avg FY16E-17E

Credit Cost to PPOP across Banks

IND

KORCHN

THA

IDN

SGP

MYS

TWN

PHL

AUS

JPN

HKG

15%

25%

35%

45%

55%

65%

75%

85%

5 10 15 20 25 30 35 40 45 50

FY17E Payout Ratio (%)

FY17E Credit Cost to PPOP (%)

30% 40% 50% 60% 70% 80%

-10% earnings hit scenarioNew payout 33% 44% 56% 67% 78% 89%Payout increase 3% 4% 6% 7% 8% 9%CET1 change (assuming 0% RWA migration) -0.11% -0.11% -0.11% -0.11% -0.11% -0.11%CET1 change (assuming 1% RWA migration) -0.22% -0.22% -0.22% -0.22% -0.22% -0.22%

Initial Payout Ratio



Capital ratio and leverage pressures starting to subside

Bank leverage has declined across Asia over the past decade (see Exhibits 22 and 23). Global banks in the US and Europe have also

significantly de-levered over the same period and pressure to build capital levels from here appears to be easing given:

EU finance ministers issued a statement saying that the completion of Basel reforms should not result in a meaningful increase

in capital (see “Europe: Banks: Receding regulatory risk as EU Council weighs in on Basel-4 debate”, July 12, 2016).

The recent EU bank stress tests yielded no new surprises, although further capital builds are required in some G-SIB institutions

(see “Europe: Banks: Stress Test: Worst fears avoided; capital divergence widens”, July 31, 2016).

US stress tests were successfully passed by all banks for a second year in a row, which our US banks team believes should

facilitate higher capital returns (see “United States: Banks: Stress Test 2016”, June 24, 2016).

As such, while uncertainty around global capital levels has been a headwind for many Asian banks, particularly DM Asia, overall we

would expect this pressure to ease. However, for some banking markets like Australia, the local banking regulators may choose to

remain more conservative than global standards and thus capital clarity remains an overhang in these markets (see “Australia:

Banks: Commentary: APRA notes improvement in major banks' capital ratios”, July 4, 2016).

Exhibit 22: Bank leverage in DM Asia has declined

Exhibit 23: EM Asia bank leverage generally remains lower than DM



Japan

Korea

Singapore

Taiwan

Australia

HongKong

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Leverage in Developed Asia

ChinaIndia

Indonesia

Malaysia

ThailandPhilippines

-

5.0

10.0

15.0

20.0

25.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Leverage in Emerging Asia



Exhibit 24: CET1 capital ratios across Asia banks have improved Exhibit 25: Asia banks look well positioned versus global peers

Note: Korea, Taiwan and India FY10 data refers to 2013.

Source: Company data, Central Bank of the Republic of China (Taiwan) (CBC)

Source: Company data, European Banking Authority, CBC.

The slower growth paradox: Better for dividends than you might think

While rapid changes to growth present a risk to profitability and asset quality, more gradual slowdowns in growth are much more

manageable by banks and also facilitate higher payout ratios. Slow loan growth reduces the capital needs of a bank and therefore

allows banks to increase their payout ratio, even for lower levels of profitability.

Below we provide a scenario analysis for a hypothetical bank with a 10% ROE, 5% asset growth, with a target 10% CET1 ratio which

can sustain a 50% payout ratio. In this example we show that a permanent 10% reduction in profitability would reduce the

sustainable payout ratio to 44%, but if this was coupled with a 2% reduction in asset growth it would instead facilitate a 67% payout

ratio (see Exhibit 26).

1311 11

13 13 128

10 10 10 97

18

14 14 13 13 13 12 11 10 10 10 10

Indo

nesi

a

Hon

gKon

g

Thai

land

Phili

ppin

es

Sing

apor

e

Indi

a

Japa

n

Mal

aysi

a

Chi

na

Kor

ea

Taiw

an

Aus

tral

ia

FY10 Latest Reported

Bubble represents Latest Reported CET1 Ratio

CET 1 Ratio (%)

18 17

14 14 14 13 13 13 13 13 13 12 12 12 12 11 11 10 10 10 10

Indo

nesi

a

Nor

dic

Hon

gKon

g

Thai

land

Ben

elux

Ger

man

y

Phili

ppin

es

Sing

apor

e

Indi

a

UK

Fran

ce

US

Larg

e C

apB

anks Ire

land

Aus

tria

& C

EE

Japa

n

Italy

Mal

aysi

a

Spai

n

Chi

na

Kor

ea

Taiw

an

Bubble represents Latest Reported CET1 Ratio

CET 1 Ratio (%)



Exhibit 26: Sustainable bank payout ratios are sensitive to asset growth Sustainable payout ratio scenarios for asset growth and profitability changes

(assuming initial bank with 10% ROE, 5% asset growth, target CET1 of 10%)


Exhibit 27: Payout ratios of banks have changed more in EM than DM Asia…

Exhibit 28: …but we expect less variability in payout ratios



-2% -1% 0% 1% 2%-10% 67% 56% 44% 33% 22%

-5% 68% 58% 47% 37% 26%

0% 70% 60% 50% 40% 30%

5% 71% 62% 52% 43% 33%

10% 73% 64% 55% 45% 36%

Asset growth change vs base case

Cha

nge

to p

rofit

s

17%14%

9%

3%1% 1% 1%

0%-2% -3%

-7%

-11%

Dividend Payout Ratio Change over the years (FY12-FY15)

5%3% 3% 2%

1%

0% 0% -1% -1% -1%-4% -4%

Dividend Payout Ratio Change over the years (FY15-FY18E)



HSBC and ABC (H) top our yield screen among Buy-rated names; PNB is at the bottom of

our Sell-rated yield names

Based on our analysis of all the Asian banks under coverage (92 stocks), we identify:

11 banks that look attractive given their high 2017E dividend yield, and are Buy-rated. Among the banks that screen well are

ANZ, CITIC (H) and SMFG (all Buy-rated and on our regional Conviction List), while Buy-rated HSBC, ABC (H), CCB (A), CCB (H),

ICBC (H), ICBC (A), Aozora and CIMB also look attractive (see Exhibit 1 for full list of the Top 30 dividend yield stocks and

associated average score based on our scorecard metrics).

5 banks with the lowest 2017E dividend yield and that are Sell-rated, namely: PNB, Bank of Baroda, Bank of East Asia, Suruga

Bank and Shizuoka Bank (see Exhibit 2 for a full list of the Bottom 30 dividend yield stocks and associated average score based

on our scorecard metrics).

Exhibit 29: Investment Ideas (Buy and Sell) in our Top and Bottom 30 dividend yield stock screen for 2017E

Source: DataStream, Goldman Sachs Global Investment Research.

Our Buy Rated Names in Top 30 Dividend Yield Stock in 2017E

Target Price Potential P/B (X) P/E (X) EPS BVPS

Name Rating Currency Price 10-Aug-2016 % Upside 2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017EEquity/ assets

Equity/ RWA

NPL ratio PCRNon-int

inc./op.revCost/

incomeROA ROE L/D Ratio

HSBC Holdings Buy HK$ 60.0 54.8 9.59 0.8 0.8 15.4 10.7 3.6 5.1 67.9 68.1 4.0 5.1 6.6 16.6 na na 41.7 61.5 0.4 5.2 naAgricultural Bank of China (H) Buy HK$ 3.48 2.97 17.05 0.8 0.7 5.6 5.6 0.5 0.5 3.8 4.2 0.2 0.5 6.4 10.3 2.7 166.1 20.0 41.5 0.9 14.5 67.1China CITIC Bank (H) Buy* HK$ 5.83 5.04 15.67 0.7 0.6 5.7 5.3 0.9 0.9 7.2 7.9 0.2 0.9 6.3 9.2 1.6 158.7 29.6 35.5 0.8 12.9 79.8China Construction Bank (A) Buy Rmb 5.70 5.11 11.55 0.8 0.7 5.8 5.7 0.9 0.9 6.3 6.9 0.3 0.9 7.8 13.3 1.9 128.2 23.0 32.8 1.1 14.8 77.5Sumitomo Mitsui Financial Group Buy* ¥ 5,260.00 3,399.00 54.75 0.5 0.5 6.3 6.2 543.8 552.6 6,683.2 7,076.7 160.0 552.6 4.7 14.7 1.4 55.7 52.3 59.3 0.4 8.2 85.1ICBC (H) Buy HK$ 5.05 4.64 8.76 0.9 0.8 6.2 6.0 0.7 0.8 5.3 5.8 0.2 0.8 7.8 13.1 1.7 140.8 25.5 32.8 1.2 14.8 73.8ICBC (A) Buy Rmb 4.90 4.4 11.87 0.8 0.7 5.8 5.7 0.7 0.8 5.3 5.8 0.2 0.8 7.8 13.1 1.7 140.8 25.5 32.8 1.2 14.8 73.8ANZ Banking Group Buy* A$ 30.71 26.8 14.79 1.4 1.3 13.2 11.6 2.0 2.3 19.8 20.8 1.6 2.3 6.3 13.9 1.0 71.4 27.2 49.0 0.7 10.8 110.5China Construction Bank (H) Buy HK$ 5.94 5.7 5.01 0.7 0.7 5.2 5.1 1.1 1.1 7.7 8.5 0.3 1.1 7.8 13.3 1.9 128.2 23.0 32.8 1.4 18.2 77.5Aozora Bank Buy ¥ 540.0 349.0 54.73 1.0 0.9 9.3 9.1 37.5 38.5 365.6 384.8 18.7 38.5 8.3 12.2 1.6 153.1 43.5 46.1 0.9 10.5 100.7CIMB Group Holdings Buy RM 5.40 4.60 17.39 0.9 0.9 10.6 8.8 0.4 0.5 4.9 5.2 0.2 0.5 8.6 25.6 2.8 93.4 37.4 56.4 0.8 9.0 93.1Our Sell names in Bottom 30 Dividend Yield Stock in 2017EPunjab National Bank Sell Rs 86 119.8 (28.18) 0.6 0.6 -88.1 43.8 -1.4 2.7 185.8 189.1 0.0 2.7 5.5 8.6 11.1 46.8 38.9 48.6 0.0 -0.7 75.7Bank of Baroda Sell Rs 142 160.3 (11.42) 1.0 0.9 13.0 9.4 12.4 17.1 165.7 177.9 3.0 17.1 5.8 10.0 8.8 61.5 35.3 49.8 0.4 6.7 70.8Bank of East Asia Sell HK$ 23 33.0 (30.20) 1.1 1.1 25.1 22.7 1.3 1.5 29.9 30.7 0.6 1.5 9.9 14.8 1.6 45.0 30.6 58.9 0.4 4.4 80.9Suruga Bank Sell ¥ 1,940 2,344.0 (17.24) 1.7 1.5 14.2 13.8 164.5 170.3 1,419.7 1,579.5 10.5 170.3 7.3 14.6 2.5 29.2 -0.4 44.3 0.9 12.1 85.0Shizuoka Bank Sell ¥ 800 788.0 1.52 0.5 0.5 9.9 9.6 79.3 82.1 1,563.2 1,629.7 20.0 82.1 8.3 19.0 3.2 20.1 24.2 54.0 0.4 5.2 83.5

2016E CAMEL ratios (%)DPS



Company snapshots

Company snapshots



HSBC Holdings (0005.HK): A new phase of higher capital returns; reiterate Buy

Source of opportunity

Since 2008 HSBC has been in capital build mode, in the beginning to fill the capital hole in the Household

division, and later to satisfy higher global regulatory capital requirements from being a GSIFI (globally

systemically important financial institution). Throughout this period levered returns were pressured by lower

leverage, on top of the negative impact that lower interest rates had on unlevered returns.

We believe that we are at the inflection point of this structural shift, with this sole focus on capital build

ending. HSBC’s announced US$2.5bn share buy-back in 2H16 should be the first step in that direction. We

believe more buy-backs could happen in future, subject to successful implementation of RWA shrinkage plans

and regulatory approval, as HSBC is now operating at the top end of the target range for CT1 CAR (12%-13%). The

likely first dividend payment (in 2017) in a decade from HSBC’s US subsidiary should help HSBC manage the cash

flow for its own dividends.

Scope for additional buy-backs, on top of an already attractive 7.2% 2017E dividend yield, should make the

dividend yield even more appealing as buy-backs effectively neutralize the dilutive effect scrip take-up for

dividends has on the share count (~2% of shares). Basel 4 implementation remains a key risk to the thesis, and

could significantly raise the existing capital requirements by inducing RWA inflation.

Catalyst

We calculate an additional c.US$5bn buy-back (~4% of mkt cap) is possible by mid-2018 if RWAs remain

flat (post the proposed Brazil sale) until YE17. However, this is not factored into our estimates as we factor in

regulatory driven RWA inflation (Basel 4). For additional details please refer to ‘HSBC: A new phase: moving

towards higher capital return; reiterate Buy’, August 8, 2016.

Valuation

We reiterate our Buy rating on HSBC with an unchanged RIM-based 12-month target price of HK$60. HSBC trades

at 0.8X 2017E P/B vs. an ROE of 7.5% and an estimated 9.6% COE.

Key risks

Higher-than-expected UK credit costs and/or capital requirements; higher operational costs in Europe.

HSBC Holdings (0005.HK) is covered by Gurpreet Singh Sahi, CFA.

INVESTMENT LIST MEMBERSHIP

Asia Pacific Buy list

Coverage View: Neutral

Growth

Returns *

Multiple

Volatility Volatility

Multiple

Returns *

Growth

Investment Profile

Low High

Percentile 20th 40th 60th 80th 100th

* Returns = Return on Capital For a complete description of the investment

profile measures please refer to the

disclosure section of this document.

HSBC Holdings (0005.HK)

Asia Pacific Banks Peer Group Average

Key data Current

Price (HK$) 54.75

12 month price target (HK$) 60.00

Market cap (HK$ mn / US$ mn) 1,077,753.8 / 138,954.7

Foreign ownership (%) --

12/15 12/16E 12/17E 12/18E

EPS (HK$) New 5.05 3.56 5.11 5.74

EPS revision (%) 0.0 0.0 0.0 0.0

P/B (X) 1.0 0.8 0.8 0.8

P/E (X) 13.3 15.4 10.7 9.5

Dividend yield (%) 5.9 7.2 7.2 7.4

P/PPOP (X) 6.4 6.9 6.4 5.8

PPOP growth (%) (10.6) (6.6) 7.8 10.4

Preprovision ROA (%) 0.9 0.8 0.8 0.9

Credit cost (%) 0.4 NM NM NM

ROA (%) 0.50 0.36 0.50 0.57

ROE (%) 7.2 5.2 7.5 8.4

18,000

20,000

22,000

24,000

26,000

28,000

30,000

45

50

55

60

65

70

75

Aug-15 Nov-15 Feb-16 May-16

Price performance chart

HSBC Holdings (L) Hang Seng Index (R)

Share price performance (%) 3 month 6 month 12 month

Absolute 12.3 4.6 (21.7)

Rel. to Hang Seng Index 1.1 (10.3) (14.6)

Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 8/10/2016 close.



HSBC Holdings: Summary financialsProfit model ($ mn) 12/15 12/16E 12/17E 12/18E Balance sheet ($ mn) 12/15 12/16E 12/17E 12/18E

Net interest income 32,531.0 30,509.1 30,030.9 31,073.3 Gross loans 1,024,428.0 -- -- --

Non-interest income 25,234.0 21,863.1 22,018.7 23,185.1 NPLs 0.0 0.0 0.0 0.0

Operating revenue 57,765.0 52,372.2 52,049.6 54,258.3 Loan loss reserves 11,027.0 -- -- --

Non-interest expense (36,182.0) (32,221.6) (30,335.3) (30,291.6) Total interest earning assets 1,698,267.0 1,737,215.6 1,755,024.4 1,784,055.0

Preprovision operating profit 21,583.0 20,150.6 21,714.3 23,966.7 Other non-interest earning assets 711,389.0 865,976.7 878,859.2 899,973.6

Total provision charge (3,721.0) (3,987.7) (3,479.5) (3,581.2) Total assets 2,409,656.0 2,603,192.3 2,633,883.7 2,684,028.6

Associates 2,556.0 2,487.5 2,601.0 2,731.3 Customer deposits 1,289,586.0 1,287,214.2 1,313,264.4 1,356,727.5

Pretax profit 18,867.0 14,693.4 20,473.3 23,116.9 Total interest-bearing liabilities 1,455,608.0 1,466,456.2 1,492,506.4 1,535,969.5

Tax (3,771.0) (3,506.7) (5,130.8) (5,779.2) Total equity 197,518.0 197,084.1 201,725.3 208,407.1

Minorities 0.0 0.0 0.0 0.0

Net profit 12,572.0 9,001.4 13,071.7 15,019.8 CAMEL ratios (%) 12/15 12/16E 12/17E 12/18E

C: Tier 1 capital ratio 12.7 13.4 13.5 13.6

Dividends 0.0 0.0 0.0 0.0 C: Equity/loans 18.6 19.2 19.3 19.5

Dividends payout (%) 78.6 111.4 77.6 70.5 C: Equity/assets 7.1 6.6 6.7 6.8

A: NPL ratio 0.0 NM NM NM

Earnings growth drivers (%) 12/15 12/16E 12/17E 12/18E A: Loan loss reserves/NPLs NM NM NM NM

Net interest margin 1.84 1.78 1.72 1.76 E: Net interest margin 1.84 1.78 1.72 1.76

Provision charge/total loans 0.40 0.45 0.38 0.38 E: Non int inc/oper revenues 43.68 41.75 42.30 42.73

YoY Growth (%) E: Cost-income ratio 62.6 61.5 58.3 55.8

Customer deposits (4.5) (0.2) 2.0 3.3 E: ROAA 0.50 0.36 0.50 0.57

Loans (5.2) (3.4) 2.0 3.2 L: Loan/deposit ratio 71.7 69.4 69.3 69.3

Net interest income (6.3) (6.2) (1.6) 3.5

Fee income (7.8) (12.3) (0.2) 3.0 Loan portfolio (%) 12/15 12/16E 12/17E 12/18E

Non-interest income (7.7) (13.4) 0.7 5.3 Commercial & corporate 63.5 -- -- --

Operating revenue (6.9) (9.3) (0.6) 4.2 Mortgages/home loans 26.8 -- -- --

Operating expenses 4.5 10.9 5.9 0.1 Consumer 36.5 -- -- --

Preprovision operating profit (10.6) (6.6) 7.8 10.4

Provision charges (3.4) 7.2 (12.7) 2.9 Valuation (current price) 12/15 12/16E 12/17E 12/18E

Pretax profit 1.0 (22.1) 39.3 12.9 P/E basic (X) 13.3 15.4 10.7 9.5

Net profit (4.1) (28.4) 45.2 14.9 P/B (X) 0.99 0.81 0.81 0.80

EPS (6.2) (29.6) 43.8 12.2 P/PPOP (X) 6.4 6.9 6.4 5.8

DPS 2.0 (0.2) 0.1 2.0 Dividend yield (%) 5.9 7.2 7.2 7.4

Market dimensions 12/15 12/16E 12/17E 12/18E EPS, basic ($) 0.65 0.46 0.66 0.74

No of branches -- -- -- -- EPS, fully-diluted ($) 0.64 0.46 0.66 0.74

No of staff (000) 255.2 -- -- --

Revenues/staff (US$) 226,349.2 NM NM NM EPS, basic growth (%) (6.2) (29.4) 43.6 12.2

Net profit/staff (US$) 49,437.1 NM NM NM EPS, fully diluted growth (%) (6.4) (29.3) 43.8 12.2

BVPS (HK$) 67.96 67.93 68.09 69.05

DuPont analysis (%) 12/15 12/16E 12/17E 12/18E DPS (HK$) 3.97 3.97 3.97 4.05

ROE 7.2 5.2 7.5 8.4

x leverage 7.0 6.9 6.7 6.8

=ROA 0.50 0.36 0.50 0.57

% of assets 12/15 12/16E 12/17E 12/18E

Net interest income 1.29 1.22 1.15 1.17

Fee income 0.58 0.51 0.49 0.50

Non-interest income 1.00 0.87 0.84 0.87

Operating revenue 2.29 2.09 1.99 2.04

Operating expenses 1.43 1.29 1.16 1.14

Preprovision operating profit 0.86 0.80 0.83 0.90

Loan loss provisions 0.15 0.16 0.13 0.13

Pretax profits 0.75 0.59 0.78 0.87

Taxes 0.15 0.14 0.20 0.22

Note: Last actual year may include reported and estimated data.

Source: Company data, Goldman Sachs Research estimates.



ABC (1288.HK): Highest div yield & implied NPL ratio among China banks; reiterate Buy


Agricultural Bank of China (H) is down 6% YTD, underperforming its big China bank H-share peers by 5% YTD (on

average the big China bank H-shares are down 1% YTD). We see its valuation as attractive given its 6.5% 2017E

dividend yield vs. the peer average at 5.9% despite its ROE being comparable to ICBC and CCB. Given the

outlook for ABC (H) of high-single digit asset and profit growth, we view its internal capital generation as

sufficient to support a stable dividend payout at 30% and a tier-1 CAR at 11% during 2016E-18E. In addition,

thanks to its below-peer valuation based on P/B and above-peer provision/loan ratio (4.5% vs 2.9% peer average

at YE15), we expect implied NPAs over RWA to reach 11.4% in 2016E vs. the 9.4% average for our H-share banks

coverage or the big China bank H-share peer average of 10.1%, which could offset any investor concerns on its

slightly weaker NPL track record vs. ICBC and CCB.

Catalyst

1) Slower growth momentum in its NPLs in the upcoming 1H16 financial statement; 2) Potential beneficiary

of Southbound Connect as investors could actively purchase ABC H-shares amid their desire for dividend yields.

For additional details please refer to ‘Southbound Connect: What & Why; Bank shares are benefiting’, July 5,

2016.

Valuation

Our RIM-based 12-month target price is unchanged at HK$3.48, implying a 0.83X 2016E P/B and 17% upside

potential. The stock trades at 0.66X 2016E P/B, at a 6%/9% discount to its big bank peers/H-share average.

Key risks

Weaker-than-expected asset quality deterioration, weaker property prices in low-tier cities where ABC is more

exposed vs peers, NIM pressure from lower deposit spreads given its large deposit base.

Impact on related securities

We maintain our Neutral rating on ABC (A) with 5% upside to our 12-month target price of Rmb3.30 and a 5.2%

2017E dividend yield.

Agricultural Bank of China (H) (1288.HK) is covered by Nan Li, CFA.

INVESTMENT LIST MEMBERSHIP

Asia Pacific Buy list

Coverage View: Neutral

Growth

Returns *

Multiple


Multiple

Returns *

Growth

Investment Profile

Low High





Agricultural Bank of China (H) (1288.HK)


Key data Current

Price (HK$) 2.97

12 month price target (HK$) 3.48

Market cap (HK$ mn / US$ mn) 964,638.2 / 124,370.7

Foreign ownership (%) --

12/15 12/16E 12/17E 12/18E

EPS (Rmb) New 0.56 0.53 0.53 0.55

EPS revision (%) 0.0 0.0 0.0 0.0

EPS growth (%) 0.6 (4.4) 0.3 3.5

EPS (dil) (Rmb) New 0.56 0.53 0.53 0.55

P/E (X) 5.3 4.8 4.8 4.6

P/B (X) 0.8 0.7 0.6 0.6

EV/EBITDA (X) NM NM NM NM

Dividend yield (%) 6.2 6.4 6.5 6.7

ROE (%) 17.0 14.5 13.3 12.6

CROCI (%) NM NM NM NM

7,500

8,000

8,500

9,000

9,500

10,000

10,500

11,000

11,500

12,000

12,500

2.0

2.2

2.4

2.6

2.8

3.0

3.2

3.4

3.6

3.8

4.0



Agricultural Bank of China (H) (L) Hang Seng China Ent. Index (R)


Absolute 10.8 9.2 (15.1)

Rel. to Hang Seng China Ent. Index 1.0 (5.6) 2.9




Agricultural Bank of China (H): Summary financialsProfit model (Rmb mn) 12/15 12/16E 12/17E 12/18E Balance sheet (Rmb mn) 12/15 12/16E 12/17E 12/18E

Net interest income 436,140.0 436,389.6 457,698.5 492,769.9 Gross loans 8,909,918.0 9,758,166.5 10,602,720.9 11,393,875.6

Non-interest income 104,722.0 109,100.1 115,136.7 120,759.9 NPLs 212,867.0 261,047.4 313,773.3 370,739.2

Operating revenue 540,862.0 545,489.8 572,835.1 613,529.8 Loan loss reserves 403,243.0 433,710.6 481,243.7 543,869.2


Preprovision operating profit 315,044.0 318,940.4 342,316.9 370,391.9 Other non-interest earning assets 1,050,650.0 995,982.3 1,031,860.9 1,094,448.2


Associates 0.0 0.0 0.0 0.0 Customer deposits 13,538,360.0 14,540,209.0 15,541,923.8 16,567,028.6

Pretax profit 230,857.0 225,838.3 226,240.1 233,710.7 Total interest-bearing liabilities 15,543,397.0 16,813,407.7 18,084,943.6 19,326,287.2

Tax (50,083.0) (48,736.4) (48,745.2) (50,383.5) Total equity 1,131,986.0 1,245,380.7 1,365,099.7 1,490,497.8

Minorities 0.0 0.0 0.0 0.0

Net profit 180,582.0 172,678.1 173,188.7 179,219.8 CAMEL ratios (%) 12/15 12/16E 12/17E 12/18E


Dividends (59,113.0) (53,181.7) (53,334.9) (55,144.2) C: Equity/loans 13.3 13.3 13.5 13.7


A: NPL ratio 2.4 2.7 3.0 3.3

Earnings growth drivers (%) 12/15 12/16E 12/17E 12/18E A: Loan loss reserves/NPLs 189.4 166.1 153.4 146.7




Customer deposits 8.0 7.4 6.9 6.6 E: ROAA 1.07 0.93 0.86 0.82

Loans 9.9 9.6 8.5 7.2 L: Loan/deposit ratio 62.8 64.1 65.1 65.5


Fee income 3.0 4.4 4.4 3.5 Loan portfolio (%) 12/15 12/16E 12/17E 12/18E

Non-interest income 11.1 4.2 5.5 4.9 Commercial & corporate 65.3 65.3 65.3 65.3

Operating revenue 3.2 0.9 5.0 7.1 Mortgages/home loans 21.6 21.6 21.6 21.6

Operating expenses (0.9) (0.3) (1.8) (5.5) Consumer 30.7 30.7 30.7 30.7


Provision charges 25.9 13.7 24.7 17.8 Valuation (current price) 12/15 12/16E 12/17E 12/18E

Pretax profit (0.6) (2.2) 0.2 3.3 P/E basic (X) 5.3 4.8 4.8 4.6

Net profit 0.6 (4.4) 0.3 3.5 P/B (X) 0.84 0.66 0.61 0.55

EPS 0.6 (4.4) 0.3 3.5 P/PPOP (X) 2.6 2.6 2.4 2.2

DPS 0.0 (10.0) 0.3 3.4 Dividend yield (%) 6.2 6.4 6.5 6.7

Market dimensions 12/15 12/16E 12/17E 12/18E EPS, basic (Rmb) 0.56 0.53 0.53 0.55

No of branches 23,670.0 23,670.0 23,670.0 23,670.0 EPS, fully-diluted (Rmb) 0.56 0.53 0.53 0.55

No of staff (000) 503,082.0 503,082.0 503,082.0 503,082.0

Revenues/staff (US$) 171.1 165.2 171.4 183.6 EPS, basic growth (%) 0.6 (4.4) 0.3 3.5

Net profit/staff (US$) 57.1 52.3 51.8 53.6 EPS, fully diluted growth (%) 0.6 (4.4) 0.3 3.5

BVPS (Rmb) 3.49 3.83 4.20 4.59

DuPont analysis (%) 12/15 12/16E 12/17E 12/18E DPS (Rmb) 0.18 0.16 0.16 0.17

ROE 17.0 14.5 13.3 12.6

x leverage 6.3 6.4 6.5 6.5

=ROA 1.07 0.93 0.86 0.82

% of assets 12/15 12/16E 12/17E 12/18E


Fee income 0.49 0.46 0.45 0.43






Pretax profits 1.37 1.22 1.12 1.07

Taxes 0.30 0.26 0.24 0.23





Punjab National Bank (PNBK.BO): Profitability to remain under pressure; maintain Sell


Punjab National Bank (PNB) has outperformed the Sensex by 36%/33% over the past 3M/6M, we believe partly

due to subsiding concerns on asset quality post the NPL clean-up exercise conducted by the Reserve Bank of

India. While we expect new NPL formation is likely to moderate from FY17E onwards, credit costs for state owned

banks (SOEs) including PNB are likely to remain elevated at 3.0%-2.7% over FY17E-18E, leading to a lower

profitability. Given that PNB has: (1) one of the highest impaired loan ratios of 20% (1QFY17), (2) an elevated

Texas ratio at 2.1% (Q1FY17), and (3) a higher proportion of credit costs to operating profit versus its peers, we

believe the bank will continue to face challenges on both growth and profitability. As we expect the stock to

underperform given sustained poor profitability, we reiterate our Sell rating with our 12-m price target of

Rs86/share implying 28% potential downside.

Catalyst

Even though new NPL formation may moderate from 12% in FY16 to 5.0%/3.5% in FY17E/FY18E, credit costs are

likely to remain elevated due to the ageing of NPLs and anemic provisioning coverage ratio on total stressed

loans (25% as of 1QFY17 vs. the India banks average of c.45%).

We believe the proportion of bad loans in the ‘more than 12-month’ ageing bucket (doubtful loans) could move

up from 54% in FY16 to 74%-75% in FY17E/FY18E. As required under the prescribed provisioning norms, credit

costs would remain elevated, leading to a potential net loss in FY17E at Rs2.7bn and marginal profits of Rs5.4bn

in FY18E. Further, the bank may require new capital of Rs98bn, equivalent to c.50% of its current Market Cap, to

take its Tier 1 ratio (8.6% as of Q1FY17) to 10%, similar to SBI and BOB. For additional details please refer to ‘India

Financial Services: Credit cycle at inflection point’, August 3, 2016.

Valuation

As we expect PNB’s profitability to remain low (a loss in FY17E, marginal profit in FY18E) and with an average

ROA of 39bps in FY18E-19E, we value its standalone lending business close to 55% discount to SBI to reflect its

much lower returns (PNB return on risk weighted assets c.0.6% over FY18E-19E vs. SBI at c.1.2%). To this, we

add Rs11/share of value for its other businesses/subsidiaries, contributing to 13% of our overall 12-m target price

of Rs86.

Key risks

Faster macro recovery, gains on its bond book due to a sharper fall in interest rates, and higher-than-expected

recoveries from bad loans.

Punjab National Bank (PNBK.BO) is covered by Rahul Jain.

Growth

Returns *

Multiple


Multiple

Returns *

Growth

Investment Profile

Low High





Punjab National Bank (PNBK.BO)


Key data Current

Price (Rs) 119.75

12 month price target (Rs) 86.00

Market cap (Rs mn / US$ mn) 189,691.3 / 2,844.3

Foreign ownership (%) 13.0

3/16 3/17E 3/18E 3/19E

EPS (Rs) (20.24) (1.36) 2.73 28.49

EPS growth (%) (222.6) 93.3 300.9 942.9

EPS (diluted) (Rs) (20.24) (1.36) 2.73 28.49

EPS (basic pre-ex) (Rs) (20.24) (1.36) 2.73 28.49

P/E (X) NM NM 43.8 4.2

P/B (X) 0.7 0.6 0.6 0.5

EV/EBITDA (X) NM NM NM NM

Dividend yield (%) 0.0 0.0 0.5 4.8

ROE (%) (10.3) (0.7) 1.4 13.5

CROCI (%) NM NM NM NM

22,000

24,000

26,000

28,000

30,000

32,000

34,000

60

80

100

120

140

160

180



Punjab National Bank (L) India BSE30 Sensex (R)


Absolute 45.0 49.8 (24.8)

Rel. to India BSE30 Sensex 34.5 28.1 (23.9)




Punjab National Bank: Summary financialsProfit model (Rs mn) 3/16 3/17E 3/18E 3/19E Balance sheet (Rs mn) 3/16 3/17E 3/18E 3/19E

Net interest income 153,117.8 143,397.4 158,354.0 180,569.2 Gross loans 4,327,215.6 4,572,766.6 4,894,230.1 5,448,437.4

Non-interest income 68,770.2 91,461.8 107,687.7 109,726.8 NPLs 558,186.9 505,839.1 458,859.3 350,645.3

Operating revenue 221,888.0 234,859.2 266,041.7 290,295.9 Loan loss reserves 203,955.9 236,980.7 253,867.9 199,418.3


Preprovision operating profit 122,163.5 120,659.5 141,518.6 151,197.9 Other non-interest earning assets 292,108.5 342,924.3 341,698.0 340,399.4


Associates 0.0 0.0 0.0 0.0 Customer deposits 5,530,511.3 6,043,633.6 6,530,375.3 7,185,475.9

Pretax profit (57,378.8) (3,459.0) 6,948.1 72,462.6 Total interest-bearing liabilities 6,153,882.0 6,494,232.6 7,025,850.1 7,730,531.9

Tax 17,634.9 788.7 (1,584.2) (16,522.2) Total equity 383,101.4 389,936.2 394,045.1 436,896.5

Minorities -- -- -- --

Net profit (39,743.9) (2,670.3) 5,363.9 55,940.4 CAMEL ratios (%) 3/16 3/17E 3/18E 3/19E


Dividends 0.0 0.0 1,072.8 11,188.1 C: Equity/loans 9.3 9.0 8.5 8.3


A: NPL ratio 12.9 11.1 9.4 6.4

Earnings growth drivers (%) 3/16 3/17E 3/18E 3/19E A: Loan loss reserves/NPLs 36.5 46.8 55.3 56.9




Customer deposits 10.3 9.3 8.1 10.0 E: ROAA (0.63) (0.04) 0.07 0.70

Loans 8.4 5.2 7.0 13.1 L: Loan/deposit ratio 74.6 71.7 71.1 73.1

Net interest income (7.5) (6.3) 10.4 14.0

Fee income 14.7 11.2 10.0 12.0 Loan portfolio (%) 3/16 3/17E 3/18E 3/19E

Non-interest income 16.7 33.0 17.7 1.9 Commercial & corporate 81.9 79.9 78.3 78.7

Operating revenue (1.1) 5.8 13.3 9.1 Mortgages/home loans 6.2 7.2 8.1 8.7

Operating expenses 4.9 (14.5) (9.0) (11.7) Consumer 13.4 14.9 16.5 17.6

Preprovision operating profit 2.2 (1.2) 17.3 6.8

Provision charges 104.1 (28.9) 9.5 (41.5) Valuation (current price) 3/16 3/17E 3/18E 3/19E

Pretax profit (245.0) 94.0 300.9 942.9 P/E basic (X) NM NM 43.8 4.2

Net profit (229.8) 93.3 300.9 942.9 P/B (X) 0.68 0.62 0.61 0.55

EPS (222.6) 93.3 300.9 942.9 P/PPOP (X) 1.6 1.6 1.3 1.3

DPS (100.0) -- -- 942.9 Dividend yield (%) 0.0 0.0 0.5 4.8

Market dimensions 3/16 3/17E 3/18E 3/19E EPS, basic (Rs) (20.24) (1.36) 2.73 28.49

No of branches 6,760.0 6,959.0 7,159.0 7,359.0 EPS, fully-diluted (Rs) (20.24) (1.36) 2.73 28.49

No of staff (000) 69.1 70.1 72.2 74.2

Revenues/staff (US$) 49,039.6 50,015.5 55,281.5 58,659.4 EPS, basic growth (%) (222.6) 93.3 300.9 942.9

Net profit/staff (US$) (8,783.8) (568.7) 1,114.6 11,303.7 EPS, fully diluted growth (%) (222.6) 93.3 300.9 942.9

BVPS (Rs) 188.85 193.04 195.69 218.01

DuPont analysis (%) 3/16 3/17E 3/18E 3/19E DPS (Rs) 0.00 0.00 0.55 5.70

ROE (10.3) (0.7) 1.4 13.5

x leverage 6.1 5.6 5.4 5.2

=ROA (0.63) (0.04) 0.07 0.70

% of assets 3/16 3/17E 3/18E 3/19E


Fee income 0.50 0.51 0.53 0.54






Pretax profits (0.90) (0.05) 0.10 0.91

Taxes (0.28) (0.01) 0.02 0.21





Appendix



Appendix: Dividend yield score card charts

Exhibit 30: Top 30 dividend yield banks versus EPS growth

Exhibit 31: Bottom 30 dividend yield banks versus EPS growth

Note: Priced as of August 10, 2016.

Note: Priced as of August 10, 2016.

Source: Bloomberg, Goldman Sachs Global Investment Research


Exhibit 32: Top 30 banks in Asia with the highest dividend yield banks versus

bond spread

Exhibit 33: Bottom 30 banks in Asia with the lowest dividend yield versus

bond spread



BOQ

MAYNAB

WBCANZ

BEN

CBAAozora

CIMBSMFG Woori IBK

KTB

HSBC

ABC (H)

MegaBOC (H)

BOCOM (H)ICBC (H)

CCB (H)HSBCNCB (H) Chongqing

ICBC (A)CCB (A)

ABC (A)CMB (H)

BOC BOCOM (A)Chongqing Rural

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

(10) (5) - 5 10 15 20

Highest FX Volatility (Q1)High FX Volatility (Q2)Low FX Volatility (Q3)Lowest FX Volatility (Q4)

Dividend Yield 2017E (%)

EPS 3-yr CAGR 2015 - 2018E (%)

Suruga

Shinsei

Shizuoka

Chiba

KTKM

INBKAXBK

HDBKSBI YESB

BBCA

BOBICBK

BNKFGBBTNHana

BMRI

BBRI

KBFG

MBT

BDO

KBANK

Ping An BEADSBG

E.SunCTBC

Chang HwaNanjing

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

(10) (5) - 5 10 15 20 25 30 35

Highest FX Volatility (Q1)High FX Volatility (Q2)Low FX Volatility (Q3)Lowest FX Volatility (Q4)

Dividend Yield (%)

EPS 3-yr CAGR 2015 - 2018E (%)

Outliers : Punjab National Bank (-45%,0)

6

6 5 55 5 5 5 5

4 4 4 4 4 4 4 4 4 4 3 3 3 3 3 3 3 3 3 3 3

HSB

C

Aoz

ora

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a

BO

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Miz

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t

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MA

Y

BO

CO

M (H

)

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C (H

)

Chi

ba

CC

B (H

)

FY2017E Dividend Yield - Domestic 10Y Bond Yield (%)

-7 -7-6 -6 -6 -6 -6

-6 -5 -5-5 -4 -4 -4 -4

-2-1

-1-1 0 0 0

1 1 1 1 1 1 1 1

PNB

KTK

M

INB

K

AXB

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SBI

YESB

BB

CA

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B

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BD

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BD

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jing

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B

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ga

KB

AN

K

Zhes

hang

Shin

sei

BN

KFG

Nin

gbo

BEA

FY2017E Dividend Yield - Domestic 10Y Bond Yield (%)



Exhibit 34: Top 30 dividend yield stocks based on FY2017E Exhibit 35: Bottom 30 dividend yield stocks based on FY2017E

Note: Priced as of 10 August 2016.

Note: Priced as of 10 August 2016.

Source: Goldman Sachs Global Investment Research


Exhibit 36: EPS CAGR (FY15-18E) for Top 30 dividend yield stocks

Exhibit 37: EPS CAGR (FY15-18E) for Bottom 30 dividend yield stocks

Source: Company data, Goldman Sachs Global Investment Research


7 77 7

66 6 6 6 6 6 6 6 6 6 6 6 5 5 5 5 5 5 5

5 55 5 5 5

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BW

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0 00 1 1 1 1 1 1 1

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ana

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end

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20

13 119

5 5 5 5 4 4 4 3 1 1 1 1 1 0 0 0 0 0

0 0 0 -1 -2 -2

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CIM

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ora

CQ

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AS

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(H)

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C (A

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(H)

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C (H

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NZ

NA

BB

EN

HS

B

Top

30 D

iv Y

ield

201

7E;

FY15

-18E

EP

S C

AG

R (

%)

29 28 2521

16 15 15 13 13 12 11 11 11 10 8 7 5 5 4 2 2 1 1

0 -1 -1 -3 -4 -5

-45

KTK

MY

ES

BIN

BK

HD

BK

MB

TB

BTN

AX

BK

BB

CA

BD

ON

anjin

gB

MR

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ana

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uga

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Shi

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PN

B

Bo

ttom

30

Div

Yie

ld 2

017E

;FY

15-1

8E E

PS

CA

GR

(%

)



Exhibit 38: FX changes volatility across Asia Pacific

Source: Bloomberg.

Exhibit 39: FY17E dividend payout ratio for Top 30 dividend yield stocks

Exhibit 40: FY17E dividend payout ratio for Bottom 30 dividend yield stocks



2.8

2.7

2.6

2.4

2.3

2.2

1.5

1.4

1.4

1.2

0.7

0.1

4 4 43

3 3

2 2 21

1

1

Japan Australia Malaysia Indonesia India SouthKorea

Thailand Singapore Philippines Taiwan China Hong Kong

Stan

dard

Dev

iatio

n of

Mon

thly

Cha

nge

in F

X/U

SD (%

)

Note: Bubble represents Quartile Rank of FX Volatility per country (1=Lowest Volatility, 4=Highest Volatility)

83 80 80 80 80 78 7771 70

66

5042 40

32 32 31 31 31 31 31 31 31 31 31 31 30 3026 26 22

BE

NH

SB

WB

CB

OQ

CB

AH

SB

CN

AB

MA

YA

NZ

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aA

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BB

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(A)

BO

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M (H

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C (A

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Top

30

Div

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;FY

17E

Div

iden

d P

ayo

ut (

%) 44

3530 28 27 27 26 25 25 25 25 24 24 23 22 22 21 20 18 18 18 17

14 14 12 116 5 4

0B

EA

Cha

ng H

wa

BM

RI

KB

AN

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BD

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ana

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PN

B

Bot

tom

30D

iv Y

ield

201

7E;

FY17

E D

ivid

end

Pay

out (

%)



Exhibit 41: FY17E dividend-bond yield for Top 30 dividend yield stocks Exhibit 42: FY17E dividend-bond yield for Bottom 30 dividend yield stocks

Note: Bond refers to current 10Y Government Bond Yield

Note: Bond refers to current 10Y Government Bond Yield



Exhibit 43: Dividend volatility growth for Top 30 dividend yield stocks

Exhibit 44: Dividend volatility growth in Bottom 30 dividend yield stocks



66 6 5 5 5 5

4 4 44 4 4 3 3 3 3 3 3 3 3 3 2 2 2 2 2 2 2

1

HS

BC

Ao

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aB

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ield

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tom

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ivid

end

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ld:

FY17

ED

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ield

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ond

Yie

ld

4

4

4 4 4 4 4 4 3 3 3 3 3 3 3 3 3 2 2 2 2 2 2 1 1 1 1 1 1 1

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gq

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B (

H)

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C (

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EN

BO

QA

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WB

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AB

CB

AW

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p 30

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Yie

ld 2

017E

:D

PS

Vol

atili

ty G

row

th

Bubble represents quartile score of the DPS Volatility Growth (4 = Highest Volatility, 1= Lowest Volatility)

4

4 4 4 4 4 3 3 3 3 3 3 3 3 2 2 2 2 2 2 2 2 2 1 1 1 1 1 1 1K

BFG

Han

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ing

An

Cha

ng H

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Nan

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BE

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BE

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BO

BD

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ld 2

017E

:D

PS

Vol

atili

ty G

row

th

Bubble represents quartile score of the DPS Volatility Growth (4 = Highest Volatility, 1= Lowest Volatility)



Exhibit 45: Share count CAGR (FY15-18E) for Top 30 dividend yield stocks Exhibit 46: Share count CAGR (FY15-18E) for Bottom 30 dividend yield stocks



Exhibit 47: Top 30 dividend yield in FY17E score card values


4

3 3 2 2 2 2

2 2 1 1

0

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 00

NA

BW

BC

HS

BC

CB

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Top

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iv Y

ield

201

7E:

FY15

-18E

CA

GR

Sh

are

(%)

9

6

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Top 30 Dividend Yield Stocks (sorted by avg score)

Rank Company Country RatingEPS CAGR FY15-18E

(%)FX Monthly Growth

Volatility (%)Dividend Payout Ratio

FY17E (%)Dividend Yield FY17E -

Bond Yield (%)Dividend Growth

Volatility

1 Chongqing Rural Commercial Bank China Neutral 8.76 0.70 21.9 1.89 0.872 HSBC Holdings Hong Kong Buy 4.37 0.11 77.6 6.38 0.233 Bank of Chongqing China Neutral 12.72 0.70 25.0 2.70 1.554 China Merchants Bank (H) China Neutral 5.42 0.70 30.0 2.33 0.445 Agricultural Bank of China (H) China Buy -0.83 0.70 30.8 3.63 0.406 Mega Financial Holdings Taiwan Neutral 4.84 1.16 65.0 5.50 1.067 China CITIC Bank (H) China Buy* 4.54 0.70 25.3 2.72 8.728 Krung Thai Bank Thailand Neutral 4.36 1.51 40.6 3.63 0.259 Bank of China (H) China Neutral -0.27 0.70 30.9 3.26 0.6010 Bank of Communications (H) China Neutral 0.58 0.70 31.4 3.02 0.5011 Hang Seng Bank Hong Kong Neutral -8.80 0.11 80.0 4.71 0.1912 China Construction Bank (A) China Buy 0.47 0.70 30.0 2.42 1.0913 Agricultural Bank of China (A) China Neutral -0.25 0.70 30.8 2.41 0.4014 Bank of China (A) China Sell 0.32 0.70 30.9 2.31 0.5515 Bank of Communications (A) China Neutral 1.17 0.70 31.4 2.08 0.4816 Sumitomo Mitsui Financial Group Japan Buy* 0.09 2.82 29.4 4.99 0.3517 Woori Bank South Korea Sell 1.46 2.19 30.4 3.25 0.0018 Bank of Queensland Ltd. Australia Neutral 2.67 2.71 79.1 5.22 0.1419 Westpac Banking Corp. Australia Neutral 0.08 2.71 80.2 4.22 0.1220 ICBC (H) China Buy 0.81 0.70 30.0 2.99 2.3921 Commonwealth Bank of Australia Australia Neutral 0.31 2.71 79.0 3.54 0.1122 ICBC (A) China Buy 1.40 0.70 30.0 2.45 2.2223 Industrial Bank of Korea South Korea Neutral 3.72 2.19 29.7 3.23 69.5524 National Australia Bank Australia Neutral -1.71 2.71 76.4 4.80 0.1125 ANZ Banking Group Australia Buy* -1.56 2.71 69.6 4.10 0.1326 Bendigo and Adelaide Bank Ltd. Australia Sell -5.98 2.71 83.9 3.98 0.1727 China Construction Bank (H) China Buy -0.12 0.70 30.0 2.83 1.2728 Aozora Bank Japan Buy 11.44 2.82 50.0 5.66 1.3729 CIMB Group Holdings Malaysia Buy 19.53 2.60 41.9 1.23 0.9730 Malayan Banking Bhd Malaysia Neutral 4.70 2.60 70.0 3.12 1.94

1 2 3 4 5



Exhibit 48: Bottom 30 dividend yield in FY17E score card values


Bottom 30 Dividend Yield (sorted by average score)

Rank Company Country RatingEPS CAGR FY15-18E

(%)FX Monthly Growth

Volatility (%)Dividend Payout Ratio

FY17E (%)Dividend Yield FY17E -

Bond Yield (%)Dividend Growth

Volatility

1 Punjab National Bank India Sell -45.1 2.3 0.0 -7.4 0.52 Chang Hwa Commercial Bank Taiwan Neutral -0.2 1.2 35.0 1.9 1.83 Bank Mandiri Indonesia Neutral 11.2 2.4 30.0 -4.7 1.24 KB Financial Group South Korea Buy 1.5 2.2 25.3 1.5 72.45 Shinsei Bank Japan Buy -4.9 2.8 4.9 0.9 0.36 Bank of Baroda India Sell 3.7 2.3 24.3 -5.5 0.47 ICICI Bank India Neutral 2.5 2.3 27.0 -5.5 0.38 Bank of East Asia Hong Kong Sell 1.5 0.1 43.9 1.1 0.89 Dah Sing Banking Group Hong Kong Neutral -4.5 0.1 24.2 1.3 0.410 BNK Financial Group South Korea Neutral -2.9 2.2 11.9 0.9 0.411 CTBC Financial Holdings Taiwan Neutral -1.5 1.2 25.0 1.7 1.012 Suruga Bank Japan Sell 7.0 2.8 6.4 0.7 0.313 State Bank of India India Buy 4.8 2.3 23.0 -6.3 0.314 BDO Unibank Philippines Neutral 12.8 1.4 26.3 -1.8 1.215 Bank Tabungan Negara Indonesia Neutral 15.2 2.4 20.0 -5.0 0.716 Hana Financial Group South Korea Neutral 11.2 2.2 18.5 1.1 5.417 Shizuoka Bank Japan Sell 0.7 2.8 25.2 2.8 0.218 Chiba Bank Japan Neutral -1.1 2.8 22.5 3.0 0.119 Bank Rakyat Indonesia Indonesia Neutral 11.1 2.4 27.0 -4.5 0.320 Kotak Mahindra Bank India Neutral 29.0 2.3 4.0 -7.3 0.321 Yes Bank India Buy* 27.9 2.3 18.0 -6.3 0.222 Ping An Bank Co. China Neutral 8.4 0.7 11.5 -0.9 4.523 E.Sun Financial Holding Taiwan Neutral 5.3 1.2 25.0 1.6 0.524 Bank Of Nanjing China Neutral 11.6 0.7 18.0 -0.1 1.425 IndusInd Bank India Neutral 24.9 2.3 17.3 -6.6 0.126 Axis Bank India Buy 14.7 2.3 14.5 -6.5 0.227 HDFC Bank India Buy 20.6 2.3 20.8 -6.4 0.128 Metropolitan Bank and Trust Co Philippines Neutral 16.3 1.4 13.9 -2.6 0.429 Bank Central Asia Indonesia Neutral 13.2 2.4 22.1 -6.0 0.130 Kasikornbank Thailand Neutral 10.0 1.5 27.5 0.9 0.1

1 2 3 4 5



Exhibit 49: Total shareholder return for Top and Bottom 30 dividend yield stocks in 2017E

Note: For PNB, EPSg CAGR refers to FY15-FY18E, as we forecast loss in FY17E.


MSCI disclosure

All MSCI data used in this report is the exclusive property of MSCI, Inc. (MSCI). Without prior written permission of MSCI, this information and any other MSCI

intellectual property may not be reproduced or redisseminated in any form and may not be used to create any financial instruments or products or any indices.

This information is provided on an “as is” basis, and the user of this information assumes the entire risk of any use made of this information. Neither MSCI, any

of its affiliates nor any third party involved in, or related to, computing or compiling the data makes any express or implied warranties or representations with

respect to this information (or the results to be obtained by the use thereof), and MSCI, its affiliates and any such third party hereby expressly disclaim all

warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any

of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in, or related to, computing or compiling the data have any liability for any

direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. MSCI and the

MSCI indexes are service marks of MSCI and its affiliates. The Global Industry Classification Standard (GICS) were developed by and is the exclusive property of

MSCI and Standard & Poor’s. GICS is a service mark of MSCI and S&P and has been licensed for use by The Goldman Sachs Group, Inc.

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Dividend Yield FY17E

EPSg CAGR FY15-17E

Top 30 Dividend Yield FY17E Bottom 30 Dividend Yield FY17E

Total Shareholder Return (i.e Dividend yield + EPSg)

Total shareholder return in this chart defines as addition of return from Div. Yield and Forecasted EPS growth



Disclosure Appendix

Reg AC

We, Ben Koo, Andrew Lyons, Gurpreet Singh Sahi, CFA, Nan Li, CFA and Rahul Jain, hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject

company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed

in this report.

Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs' Global Investment Research division.

Investment Profile

The Goldman Sachs Investment Profile provides investment context for a security by comparing key attributes of that security to its peer group and market. The four key attributes depicted are: growth,

returns, multiple and volatility. Growth, returns and multiple are indexed based on composites of several methodologies to determine the stocks percentile ranking within the region's coverage

universe.

The precise calculation of each metric may vary depending on the fiscal year, industry and region but the standard approach is as follows:

Growth is a composite of next year's estimate over current year's estimate, e.g. EPS, EBITDA, Revenue. Return is a year one prospective aggregate of various return on capital measures, e.g. CROCI,

ROACE, and ROE. Multiple is a composite of one-year forward valuation ratios, e.g. P/E, dividend yield, EV/FCF, EV/EBITDA, EV/DACF, Price/Book. Volatility is measured as trailing twelve-month

volatility adjusted for dividends.

Quantum

Quantum is Goldman Sachs' proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used for in-depth analysis of a single company, or to make

comparisons between companies in different sectors and markets.

GS SUSTAIN

GS SUSTAIN is a global investment strategy aimed at long-term, long-only performance with a low turnover of ideas. The GS SUSTAIN focus list includes leaders our analysis shows to be well

positioned to deliver long term outperformance through sustained competitive advantage and superior returns on capital relative to their global industry peers. Leaders are identified based on

quantifiable analysis of three aspects of corporate performance: cash return on cash invested, industry positioning and management quality (the effectiveness of companies' management of the

environmental, social and governance issues facing their industry).

Disclosures

Coverage group(s) of stocks by primary analyst(s)

Ben Koo: Asia Pacific Financials. Andrew Lyons: Australia-Banks, Australia-Insurance. Gurpreet Singh Sahi, CFA: Asia Pacific Exchanges, Asia Pacific Financials, Japan-Brokers & Asset Managers. Nan

Li, CFA: China Brokers, China Financials. Rahul Jain: Asia Pacific Financials.

Asia Pacific Exchanges: Hong Kong Exchanges, Singapore Exchange.

Asia Pacific Financials: AIA Group, AMMB Holdings, Axis Bank, Bajaj Finance, Bangkok Bank, Bank Central Asia, Bank Danamon, Bank Mandiri, Bank Negara Indonesia, Bank of Baroda, Bank of East

Asia, Bank Rakyat Indonesia, Bank Tabungan Negara, BDO Unibank, BNK Financial Group, BOC Hong Kong (Holdings), Cathay Financial Holding, Chailease Holdings, Chang Hwa Commercial Bank,

China Development Financial, CIMB Group Holdings, CTBC Financial Holdings, Dah Sing Banking Group, Dah Sing Financial Holdings, DBS Group Holdings, DGB Financial Group, E.Sun Financial

Holding, First Financial Holdings, Fubon Financial Holdings, Hana Financial Group, Hang Seng Bank, HDFC Bank, Hong Leong Bank, Housing Development Finance Corp., HSBC Holdings, ICICI Bank,

IDFC Bank Ltd., IndusInd Bank, Industrial Bank of Korea, Kasikornbank, KB Financial Group, Kotak Mahindra Bank, Krung Thai Bank, LIC Housing Finance, Mahindra & Mahindra Financial Svcs,

Malayan Banking Bhd, Mega Financial Holdings, Metropolitan Bank and Trust Co, Oversea-Chinese Banking Corp., Public Bank Bhd, Punjab National Bank, Shin Kong Financial Holdings, Shinhan

Financial Group, Shriram Transport Finance, Siam Commercial Bank, SinoPac Holdings, Standard Chartered Bank, State Bank of India, Taishin Financial Holdings, TMB Bank Public Co., United

Overseas Bank, Woori Bank, Yes Bank, Yuanta FHC.

Australia-Banks: ANZ Banking Group, Bank of Queensland Ltd., Bendigo and Adelaide Bank Ltd., Commonwealth Bank of Australia, Macquarie Group, National Australia Bank, Pepper Group, Westpac

Banking Corp..

Australia-Insurance: Genworth Mortgage Ins. Australia.

China Brokers: China Galaxy Securities, China International Capital Corp., China Merchants Securities, CITIC Securities (A), CITIC Securities (H), Everbright Securities, GF Securities Co.(A), GF Securities

Co.(H), Haitong Securities (A), Haitong Securities (H), Huatai Securities (A), Huatai Securities (H).

China Financials: Agricultural Bank of China (A), Agricultural Bank of China (H), Bank of Beijing, Bank of China (A), Bank of China (H), Bank of Chongqing, Bank of Communications (A), Bank of

Communications (H), Bank of Nanjing, Bank of Ningbo, Bank of Qingdao Co., China Cinda Asset Management Co., China CITIC Bank (A), China CITIC Bank (H), China Construction Bank (A), China

Construction Bank (H), China Everbright Bank, China Huarong Asset Management Co., China Life Insurance Co. (A), China Life Insurance Co. (H), China Merchants Bank (A), China Merchants Bank (H),

China Minsheng Banking (A), China Minsheng Banking (H), China Pacific Insurance (A), China Pacific Insurance (H), China Taiping Insurance Holdings, China Zheshang Bank Co., Chongqing Rural



Commercial Bank, Far East Horizon, Hua Xia Bank, ICBC (A), ICBC (H), Industrial Bank, New China Life Insurance (A), New China Life Insurance (H), PICC Group, PICC Property and Casualty, Ping An

Bank Co., Ping An Insurance Group (A), Ping An Insurance Group (H), Shanghai Pudong Development Bank, Universal Medical.

Japan-Brokers & Asset Managers: Daiwa Securities Group, Japan Exchange Group, Nomura Holdings.

Company-specific regulatory disclosures

The following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, "Goldman Sachs") and companies covered by the Global Investment Research Division of

Goldman Sachs and referred to in this research.

Goldman Sachs has received compensation for investment banking services in the past 12 months: Agricultural Bank of China (H) (HK$3.01) and HSBC Holdings (HK$54.30)

Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Agricultural Bank of China (H) (HK$3.01) and HSBC Holdings (HK$54.30)

Goldman Sachs had an investment banking services client relationship during the past 12 months with: Agricultural Bank of China (H) (HK$3.01) and HSBC Holdings (HK$54.30)

Goldman Sachs had a non-investment banking securities-related services client relationship during the past 12 months with: Agricultural Bank of China (H) (HK$3.01), HSBC Holdings (HK$54.30) and

Punjab National Bank (Rs116.25)

Goldman Sachs had a non-securities services client relationship during the past 12 months with: Agricultural Bank of China (H) (HK$3.01), HSBC Holdings (HK$54.30) and Punjab National Bank

(Rs116.25)

Goldman Sachs makes a market in the securities or derivatives thereof: Agricultural Bank of China (H) (HK$3.01) and HSBC Holdings (HK$54.30)

Goldman Sachs International acts as corporate broker to: HSBC Holdings (HK$54.30)

Goldman Sachs holds a position greater than U.S. $15 million (or equivalent) in the debt or debt instruments of: HSBC Holdings (HK$54.30)

Distribution of ratings/investment banking relationships

Goldman Sachs Investment Research global Equity coverage universe

Rating Distribution Investment Banking Relationships

Buy Hold Sell Buy Hold Sell

Global 31% 54% 15% 66% 60% 50%

As of July 1, 2016, Goldman Sachs Global Investment Research had investment ratings on 2,963 equity securities. Goldman Sachs assigns stocks as Buys and Sells on various regional Investment

Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for the purposes of the above disclosure required by the FINRA Rules. See 'Ratings, Coverage groups

and views and related definitions' below. The Investment Banking Relationships chart reflects the percentage of subject companies within each rating category for whom Goldman Sachs has provided

investment banking services within the previous twelve months.

Price target and rating history chart(s)

101

100102

10194 92 94

9087

8392

88

838280

7877

7067

6657

15,000

17,000

19,000

21,000

23,000

25,000

27,000

29,000

405060708090

100110120

HSBC Holdings (0005.HK)

Goldman Sachs rating and stock price target history

Stock Price Currency : Hong Kong Dollar

Source: Goldman Sachs Investment Research for ratings and price targets; FactSet closing prices as of 6/30/2016.

The price targets show n should be considered in the context of all prior published Goldman Sachs research, which may or may not have included price targets, as w ell as developments relating to the company, its industry and financial markets.

Rating

Price target

Price target at removal

Covered by Gurpreet Singh Sahi, CFA,as of May 20, 2015

Not covered by current analyst

Hang Seng Index

Index

Price

Stoc

kPric

e

AB

S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J2013 2014 2015 2016

4.4 5

4.9

4.7

3.48

6,0007,0008,0009,00010,00011,00012,00013,00014,00015,00016,000

2.00

2.50

3.00

3.50

4.00

4.50

5.00

Agricultural Bank of China (H) (1288.HK)


Stock Price Currency : Hong Kong Dollar



Rating

Price target


Covered by Nan Li, CFA,as of Jun 19, 2015


Hang Seng China Ent. Index

Index

Price

Stoc

kPric

e

AB




Regulatory disclosures

Disclosures required by United States laws and regulations

See company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this report: manager or co-manager in a pending transaction; 1% or

other ownership; compensation for certain services; types of client relationships; managed/co-managed public offerings in prior periods; directorships; for equity securities, market making and/or

specialist role. Goldman Sachs trades or may trade as a principal in debt securities (or in related derivatives) of issuers discussed in this report.

The following are additional required disclosures: Ownership and material conflicts of interest: Goldman Sachs policy prohibits its analysts, professionals reporting to analysts and members of their

households from owning securities of any company in the analyst's area of coverage. Analyst compensation: Analysts are paid in part based on the profitability of Goldman Sachs, which includes

investment banking revenues. Analyst as officer or director: Goldman Sachs policy prohibits its analysts, persons reporting to analysts or members of their households from serving as an officer,

director, advisory board member or employee of any company in the analyst's area of coverage. Non-U.S. Analysts: Non-U.S. analysts may not be associated persons of Goldman, Sachs & Co. and

therefore may not be subject to FINRA Rule 2241 or FINRA Rule 2242 restrictions on communications with subject company, public appearances and trading securities held by the analysts.

Distribution of ratings: See the distribution of ratings disclosure above. Price chart: See the price chart, with changes of ratings and price targets in prior periods, above, or, if electronic format or if

with respect to multiple companies which are the subject of this report, on the Goldman Sachs website at http://www.gs.com/research/hedge.html.

Additional disclosures required under the laws and regulations of jurisdictions other than the United States

The following disclosures are those required by the jurisdiction indicated, except to the extent already made above pursuant to United States laws and regulations. Australia: Goldman Sachs Australia

Pty Ltd and its affiliates are not authorised deposit-taking institutions (as that term is defined in the Banking Act 1959 (Cth)) in Australia and do not provide banking services, nor carry on a banking

business, in Australia. This research, and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act, unless otherwise agreed by Goldman Sachs. In

producing research reports, members of the Global Investment Research Division of Goldman Sachs Australia may attend site visits and other meetings hosted by the issuers the subject of its research

reports. In some instances the costs of such site visits or meetings may be met in part or in whole by the issuers concerned if Goldman Sachs Australia considers it is appropriate and reasonable in the

specific circumstances relating to the site visit or meeting. Brazil: Disclosure information in relation to CVM Instruction 483 is available at http://www.gs.com/worldwide/brazil/area/gir/index.html.

Where applicable, the Brazil-registered analyst primarily responsible for the content of this research report, as defined in Article 16 of CVM Instruction 483, is the first author named at the beginning of

this report, unless indicated otherwise at the end of the text. Canada: Goldman Sachs Canada Inc. is an affiliate of The Goldman Sachs Group Inc. and therefore is included in the company specific

disclosures relating to Goldman Sachs (as defined above). Goldman Sachs Canada Inc. has approved of, and agreed to take responsibility for, this research report in Canada if and to the extent that

Goldman Sachs Canada Inc. disseminates this research report to its clients. Hong Kong: Further information on the securities of covered companies referred to in this research may be obtained on

request from Goldman Sachs (Asia) L.L.C. India: Further information on the subject company or companies referred to in this research may be obtained from Goldman Sachs (India) Securities Private

Limited, Research Analyst - SEBI Registration Number INH000001493, 951-A, Rational House, Appasaheb Marathe Marg, Prabhadevi, Mumbai 400 025, India, Corporate Identity Number

U74140MH2006FTC160634, Phone +91 22 6616 9000, Fax +91 22 6616 9001. Goldman Sachs may beneficially own 1% or more of the securities (as such term is defined in clause 2 (h) the Indian

Securities Contracts (Regulation) Act, 1956) of the subject company or companies referred to in this research report. Japan: See below. Korea: Further information on the subject company or

companies referred to in this research may be obtained from Goldman Sachs (Asia) L.L.C., Seoul Branch. New Zealand: Goldman Sachs New Zealand Limited and its affiliates are neither "registered

banks" nor "deposit takers" (as defined in the Reserve Bank of New Zealand Act 1989) in New Zealand. This research, and any access to it, is intended for "wholesale clients" (as defined in the Financial

Advisers Act 2008) unless otherwise agreed by Goldman Sachs. Russia: Research reports distributed in the Russian Federation are not advertising as defined in the Russian legislation, but are

information and analysis not having product promotion as their main purpose and do not provide appraisal within the meaning of the Russian legislation on appraisal activity. Singapore: Further

information on the covered companies referred to in this research may be obtained from Goldman Sachs (Singapore) Pte. (Company Number: 198602165W). Taiwan: This material is for reference

only and must not be reprinted without permission. Investors should carefully consider their own investment risk. Investment results are the responsibility of the individual investor. United Kingdom: Persons who would be categorized as retail clients in the United Kingdom, as such term is defined in the rules of the Financial Conduct Authority, should read this research in conjunction

with prior Goldman Sachs research on the covered companies referred to herein and should refer to the risk warnings that have been sent to them by Goldman Sachs International. A copy of these

risks warnings, and a glossary of certain financial terms used in this report, are available from Goldman Sachs International on request.

156140136

100

106102

142

212

214

211197

108102

106

104

11173

15,000

17,000

19,000

21,000

23,000

25,000

27,000

29,000

507090

110130150170190210230250

Punjab National Bank (PNBK.BO)


Stock Price Currency : Indian Rupee



Rating

Price target


Covered by Rahul Jain,as of Jul 22, 2014


India BSE30 Sensex

Index

Price

Stoc

kPric

e

Jul 1, 2013 BJan 16, 2014 to S from N

Jul 2 Mar 26 May 27N N

AS




European Union: Disclosure information in relation to Article 4 (1) (d) and Article 6 (2) of the European Commission Directive 2003/125/EC is available at

http://www.gs.com/disclosures/europeanpolicy.html which states the European Policy for Managing Conflicts of Interest in Connection with Investment Research.

Japan: Goldman Sachs Japan Co., Ltd. is a Financial Instrument Dealer registered with the Kanto Financial Bureau under registration number Kinsho 69, and a member of Japan Securities Dealers

Association, Financial Futures Association of Japan and Type II Financial Instruments Firms Association. Sales and purchase of equities are subject to commission pre-determined with clients plus

consumption tax. See company-specific disclosures as to any applicable disclosures required by Japanese stock exchanges, the Japanese Securities Dealers Association or the Japanese Securities

Finance Company.

Ratings, coverage groups and views and related definitions

Buy (B), Neutral (N), Sell (S) -Analysts recommend stocks as Buys or Sells for inclusion on various regional Investment Lists. Being assigned a Buy or Sell on an Investment List is determined by a

stock's return potential relative to its coverage group as described below. Any stock not assigned as a Buy or a Sell on an Investment List is deemed Neutral. Each regional Investment Review

Committee manages various regional Investment Lists to a global guideline of 25%-35% of stocks as Buy and 10%-15% of stocks as Sell; however, the distribution of Buys and Sells in any particular

coverage group may vary as determined by the regional Investment Review Committee. Regional Conviction Buy and Sell lists represent investment recommendations focused on either the size of the

potential return or the likelihood of the realization of the return.

Return potential represents the price differential between the current share price and the price target expected during the time horizon associated with the price target. Price targets are required for all

covered stocks. The return potential, price target and associated time horizon are stated in each report adding or reiterating an Investment List membership.

Coverage groups and views: A list of all stocks in each coverage group is available by primary analyst, stock and coverage group at http://www.gs.com/research/hedge.html. The analyst assigns one

of the following coverage views which represents the analyst's investment outlook on the coverage group relative to the group's historical fundamentals and/or valuation. Attractive (A). The

investment outlook over the following 12 months is favorable relative to the coverage group's historical fundamentals and/or valuation. Neutral (N). The investment outlook over the following 12

months is neutral relative to the coverage group's historical fundamentals and/or valuation. Cautious (C). The investment outlook over the following 12 months is unfavorable relative to the coverage

group's historical fundamentals and/or valuation.

Not Rated (NR). The investment rating and target price have been removed pursuant to Goldman Sachs policy when Goldman Sachs is acting in an advisory capacity in a merger or strategic

transaction involving this company and in certain other circumstances. Rating Suspended (RS). Goldman Sachs Research has suspended the investment rating and price target for this stock, because

there is not a sufficient fundamental basis for determining, or there are legal, regulatory or policy constraints around publishing, an investment rating or target. The previous investment rating and

price target, if any, are no longer in effect for this stock and should not be relied upon. Coverage Suspended (CS). Goldman Sachs has suspended coverage of this company. Not Covered (NC). Goldman Sachs does not cover this company. Not Available or Not Applicable (NA). The information is not available for display or is not applicable. Not Meaningful (NM). The

information is not meaningful and is therefore excluded.

Global product; distributing entities

The Global Investment Research Division of Goldman Sachs produces and distributes research products for clients of Goldman Sachs on a global basis. Analysts based in Goldman Sachs offices

around the world produce equity research on industries and companies, and research on macroeconomics, currencies, commodities and portfolio strategy. This research is disseminated in Australia

by Goldman Sachs Australia Pty Ltd (ABN 21 006 797 897); in Brazil by Goldman Sachs do Brasil Corretora de Títulos e Valores Mobiliários S.A.; in Canada by either Goldman Sachs Canada Inc. or

Goldman, Sachs & Co.; in Hong Kong by Goldman Sachs (Asia) L.L.C.; in India by Goldman Sachs (India) Securities Private Ltd.; in Japan by Goldman Sachs Japan Co., Ltd.; in the Republic of Korea by

Goldman Sachs (Asia) L.L.C., Seoul Branch; in New Zealand by Goldman Sachs New Zealand Limited; in Russia by OOO Goldman Sachs; in Singapore by Goldman Sachs (Singapore) Pte. (Company

Number: 198602165W); and in the United States of America by Goldman, Sachs & Co. Goldman Sachs International has approved this research in connection with its distribution in the United

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