Based on total assets, Bank of Communications is the fifth largest bank in China after the four major state-owned banks. As the "leader" of domestic commercial banks, Bank of Communications has very obvious advantages in the industry: First, the company has good asset quality. Although bad debts and bad debts have become a major problem in China's banking industry, Bank of Communications does not have many worries in this regard. As of the end of last year, Bank of Communications' non-performing loan ratio was only 2.91%, far lower than the 4.9% and 15.6% non-performing loan ratios of China's joint-stock commercial banks and the four major state-owned banks respectively. Bank of Communications' capital adequacy ratio of 9.72% ranks among the best among mainland commercial banks. Good asset quality provides a solid foundation for the company's business expansion and sustainable development. Secondly, the company has an extensive business structure and a good customer base. Bank of Communications is one of the oldest commercial banks in China and has established a widespread customer base in China. It has more than 500,000 corporate and institutional customers, and most of them are located in the Yangtze River Delta, Bohai Rim Economic Circle and Pearl River Delta, which are the most economically developed areas in China. In addition to its extensive distribution network in China, Bank of Communications also has branches in the world's major financial centers such as Hong Kong, New York, Tokyo and Singapore. The company will have broad room for development in the future. Third, the company has a trustworthy management structure. Bank of Communications is the first commercial bank in China to design and implement a relatively advanced asset and liability management system. The company's senior management team has an average of 20 years of experience in the banking industry, which helps the company remain invincible in complex industry competition. HSBC's strategic investment can bring the company's rich experience and expertise in the international banking industry, helping it further improve its business operations and corporate governance. It can be seen from the financial statements disclosed in the company's prospectus that among the three main businesses of corporate banking, retail banking and treasury business, the proportion of revenue accounted for by corporate banking in the past three years was 70.0%, 68.1% and 63.3% respectively. %; the steady growth of this business can provide an effective guarantee for the company's profitability stability. Retail banking business and treasury business have also experienced rapid growth in recent years, and the proportion of revenue has also increased year by year. These all indicate that the company's business development momentum is good. From a profitability perspective, Bank of Communications' net profits in the past three years were 4.429 billion yuan, 4.376 billion yuan and 1.604 billion yuan respectively; the reason for the sharp decline in profits last year was the drag on related deferred taxes. According to the forecast in the prospectus, the company is expected to achieve a net profit of no less than 7.874 billion yuan by the end of this year, with earnings per share reaching 0.18 yuan. Possessing a variety of market perspectives From a market perspective, Bank of Communications also has unique market advantages: On the one hand, Bank of Communications is the first banking H-share listed in Hong Kong. Before the listing of Bank of Communications, no mainland bank was directly listed in Hong Kong. Although the 110 H-share companies cover most major mainland industries such as energy, petrochemicals, electric power, highways, steel, automobiles, communications, pharmaceuticals, metals, insurance, and retail, they provide international funds to invest in high-quality Chinese companies and share the Chinese economy. The results of rapid development provide an excellent window and approach; however, the lack of banking companies has been a major shortcoming of the H-share market over the years. The listing of Bank of Communications has filled this gap. Generally speaking, most of the leading companies in important industries on the mainland are listed in Hong Kong first and then return to the mainland to issue A-shares. Therefore, as one of the first leading companies in the mainland banking industry to be listed in Hong Kong, Bank of Communications is destined to receive more attention from the market. On the other hand, Bank of Communications acquired a strategic stake in HSBC. In August last year, HSBC Holdings spent US$1.746 billion to acquire 7.775 billion shares of Bank of Communications. The 19.9% ??shareholding ratio was close to the upper limit of 20% allowed by the mainland banking regulatory authorities for a single foreign bank to hold shares in domestic commercial banks. Before the IPO of Bank of Communications, the management of HSBC Holdings had already made it clear that it would subscribe for 1/5 of the new shares to ensure that its shareholding ratio and position as the second largest shareholder remain unchanged. This is enough to show that HSBC is fully committed to Bank of Communications. confidence. At the same time, HSBC promised not to sell its shares in Bank of Communications before the end of August 2008; and if approved by mainland regulators, HSBC will continue to increase its shareholding ratio to as much as 40%. In addition, as an outstanding representative of domestic commercial banks, Bank of Communications will definitely be heavily held by JPMorgan Chase’s foreign funds after its listing.

In the H-share market, the shareholding trends of foreign funds have always had a good demonstration effect on other investors. The investment of foreign funds will play an important role in improving the valuation of Bank of Communications. Risk factors cannot be ignored The risks of Bank of Communications cannot be ignored either. From a business point of view, the growth of Bank of Communications' corporate and retail loan business is mainly concentrated in economic zones with higher per capita GDP such as the Yangtze River Delta, Bohai Rim Economic Circle and Pearl River Delta. If the economy of these areas experiences a major recession, Bank of Communications' financial situation and operating results will be significantly affected. At the same time, Bank of Communications' loans are mainly concentrated in the manufacturing industry, trading industry and real estate industry. Any recession in these industries will also have an important negative impact on Bank of Communications. Bank of Communications' current business structure lacks the stability similar to that of HSBC. From a valuation perspective, based on the expected 2005 earnings in Bank of Communications' IPO information and the final IPO price of HK$2.5, the company's IPO earnings ratio can be calculated to be 14.7 times. This price-to-earnings ratio is consistent with the current price-to-earnings ratio of its strategic investor, Hong Kong's largest bank stock and blue-chip stock HSBC Holdings (0005.HK). However, the market images of Bank of Communications and HSBC Holdings are obviously different. This means that Bank of Communications has no obvious valuation advantage compared with bank stocks that have been listed in Hong Kong. Moreover, although Bank of Communications' capital adequacy ratio of 9.7% is much higher than that of domestic peers, it is the lowest compared with banking stocks that have been listed in Hong Kong. Relevant information shows that Bank of China and China Construction Bank will also conduct their overseas IPO activities before the end of this year or the beginning of next year. This means that in the next six months or so, international investors who prefer Chinese banking companies will have more investment options. By then, it is unknown whether the funds that have purchased Bank of Communications shares during the IPO period will be transferred to these banking companies. After all, the attractiveness brought by the price of Bank of Communications is relatively limited. Judging from experience, there is a positive correlation between the subscription ratio of new stocks in the Hong Kong stock market during the IPO period, the final IPO price and the performance of the first day after the shares are listed. Therefore, Bank of Communications should perform well after listing. However, this could also spell trouble for its stock price performance over the longer term. The performance of China Life and other large mainland companies during their initial IPOs and listings can serve as a lesson for the future. In addition, the reason why the Bank of Communications' IPO is so popular and highly subscribed is related to factors such as its low entry threshold and the low proportion of the public offering part in the IPO scale; why is the IPO activity of Bank of Communications, which has great value advantages? It is quite strange that such a situation occurs.