Perhaps it is their size that makes them so difficult to grasp. Maybe there is also a dash of that hard-to-quantify suspicion that lurks in investors' minds when they get any numbers related to China. Either way, the country's big banks have none of the market stabilizers to be expected of such behemoths.
China's slowing economy has played a part, as have regulators' efforts, in forcing competition by slowly liberalizing interest margins. But that still makes a one-fifth rise in the earnings yields of, say, Agricultural Bank and China Construction Bank in the past year look extreme when earnings have risen a fifth and 12 per cent over the past year respectively in the latest quarter. Reported results from three of the big four show fairly resilient interest margins and limited signs of the growing bad loans that everyone fears.
For those who do consider earnings yields as a corollary to the risk priced into bond yields, then China's big four are compensating investors for something: each is trading at an earnings yield of at least 16 per cent, or more than double their rates three years ago. China is not booming now as it was then but the slowdown is not terrible, either – especially when compared with the conditions facing developed-world banks. JPMorgan, BNP Paribas and Singapore's DBS offer earnings yields of 13, 13 and 10 per cent respectively.
Shares of the big four have rallied from their summer lows but their sheer size means that the 2 per cent still lost from their combined market capitalization this year amounts to $18-billion (U.S.) – enough, say, to buy a decent-sized Scandinavian bank such as SEB. Short of such a shopping trip, extremely unlikely, business seems poised to continue as usual in China – the banks will get on with it, regulators will continue slowly to tweak the rules and investors will find reasons not to get excited.