Stock Analysis & Valuation Bank of Chongqing Co., Ltd. (1963.HK)

• Previous Close: HK$7.87
• Sector Valuation Confidence Level: High

Valuation method	Value, HK$	Upside, %
Artificial intelligence (AI)	189.10	2303
Intrinsic value (DCF)	2.68	-66
Graham-Dodd Method	20.00	154
Graham Formula	374.40	4657

Strategic Investment Analysis

Company Overview

Bank of Chongqing Co., Ltd. (1963.HK) is a prominent regional commercial bank headquartered in Chongqing, China, providing comprehensive banking and financial services to corporate and individual customers. Operating through three core segments—Corporate Banking, Retail Banking, and Treasury—the bank offers diverse deposit products, loans, inter-bank lending, bond investments, foreign currency transactions, and digital banking solutions. With 156 operational units spanning 38 districts in Chongqing and three western Chinese provinces, Bank of Chongqing maintains a strong regional footprint while expanding its influence across Western China. As part of China's rapidly evolving financial services sector, the bank plays a critical role in supporting regional economic development through financial leasing, settlement services, and SME financing. Established in 1996 and listed on the Hong Kong Stock Exchange, Bank of Chongqing combines deep local market knowledge with modern banking capabilities to serve one of China's most dynamic economic regions.

Investment Summary

Bank of Chongqing presents a mixed investment case with regional strengths offset by sector-wide challenges. The bank's deep penetration in Chongqing—a major Chinese metropolitan area—provides stable deposit funding and lending opportunities, while its 0.454 beta suggests lower volatility than broader Chinese financial stocks. However, negative operating cash flow of HKD -20.7 billion raises liquidity concerns, though substantial cash reserves of HKD 63.4 billion provide some buffer. The bank's net income of HKD 5.1 billion on revenue of HKD 32.2 billion indicates reasonable profitability, while a dividend yield of approximately 4.8% (based on current price and dividend) offers income appeal. Major risks include China's property sector exposure, economic slowdown impacts on regional borrowers, and regulatory pressures on Chinese regional banks. Investors should monitor asset quality trends and the bank's ability to navigate China's challenging interest rate environment.

Competitive Analysis

Bank of Chongqing's competitive positioning is defined by its strong regional focus within China's vast banking landscape. The bank benefits from deep local knowledge and relationships in Chongqing municipality, which serves as a major economic hub in Western China with over 30 million people. This regional specialization provides advantages in understanding local market dynamics and customer needs that national banks cannot easily replicate. However, the bank faces intense competition from China's Big Four state-owned banks that benefit from massive scale, lower funding costs, and nationwide networks. Additionally, joint-stock commercial banks and city commercial banks operate in overlapping markets with similar service offerings. Bank of Chongqing's treasury operations and inter-bank activities face competition from more sophisticated national players with greater resources. The bank's expansion into neighboring western provinces represents both growth opportunity and competitive challenge as it encounters established local banks in those regions. Digital banking capabilities represent another competitive frontier where larger banks typically have advantage in technology investment. The bank's moderate scale (HKD 31.4 billion market cap) limits its competitive reach against giants like ICBC and China Construction Bank, but its regional focus allows for more tailored services to local customers.

Major Competitors

• Bank of China Limited (3988.HK): As one of China's Big Four state-owned banks, Bank of China possesses massive scale, international presence, and lower funding costs that regional banks cannot match. Its strengths include extensive branch network, government backing, and diversified business segments. However, its bureaucratic structure may limit agility compared to regional players like Bank of Chongqing in serving local market needs. While Bank of China dominates in corporate banking and international services, it may be less focused on Chongqing's specific regional dynamics.
• Industrial and Commercial Bank of China Limited (1398.HK): ICBC is the world's largest bank by assets with unparalleled scale advantages and the lowest funding costs in China. Its strengths include dominant market share, extensive retail network, and strong government relationships. However, its massive size creates operational inefficiencies and slower decision-making that regional banks can exploit. While ICBC competes aggressively in all Chinese markets including Chongqing, Bank of Chongqing may have deeper local relationships and more flexible service offerings for regional customers.
• China CITIC Bank Corporation Limited (0998.HK): As a national joint-stock commercial bank, CITIC Bank combines scale with more market-oriented operations than state-owned giants. Its strengths include strong investment banking capabilities, corporate relationships, and nationwide presence. However, it lacks the deep regional focus that Bank of Chongqing maintains in its home market. CITIC competes directly in corporate banking services but may not match Bank of Chongqing's localized knowledge in the Chongqing region.
• China Merchants Bank Co., Ltd. (3698.HK): CMB is recognized as China's leading retail-focused bank with superior digital capabilities and wealth management services. Its strengths include strong brand recognition, innovative products, and high-quality customer service. However, its premium positioning may limit mass market appeal compared to regional banks. While CMB competes in Chongqing with advanced digital offerings, Bank of Chongqing benefits from deeper physical presence and local government relationships in the region.
• China Zheshang Bank Co., Ltd. (2016.HK): As another regional bank focused on Zhejiang province, Zheshang Bank represents a comparable regional player with similar business model challenges and opportunities. Its strengths include deep regional knowledge and SME focus in its home market. However, it faces the same scale limitations as Bank of Chongqing when competing against national giants. Both banks exemplify the regional banking model but operate in different geographic markets with limited direct competition.
• Bank of Tianjin Co., Ltd. (1578.HK): Another city commercial bank with regional focus, Bank of Tianjin operates a similar model to Bank of Chongqing but in Northern China. Its strengths include strong local government support and understanding of Tianjin's regional economy. However, it faces the same competitive pressures from national banks in its home market. While not directly competing geographically, it represents a comparable regional banking model facing similar industry challenges.