China Construction Bank (CCB), as the first of the big four state-owned commercial banks to go public, made its maiden results briefings on April 6^th. And then, its announcement became the limelight in the market. All famous analysts of investment banks released their research reports over CCB’s results one after another. The market players and experts generally reflected that CCB maintained a considerable return for shareholders in 2005, with ROE of nearly 18%. And its asset quality continues to be improved; business remains robust growth; and operation results exceed the expectation disclosed in its prospectus and also overperform the average anticipation in the market. 

It is noticeable that some international analysts such as those from Citigroup and Goldman Sachs raised their rebuttal, mainly aiming at CCB’s lower than expected effective tax rate and 1.3 billion yuan foreign currency dealing loss. Some presses both from home and abroad quoted the above analysts reports to stir the market and accuse CCB’s insufficient information disclosure. Yet other presses refuted the accusations mentioned.

Mr. Xi Deyan, CCB’s spokesman, solemnly declared, “As a publicly listed bank, we have strictly followed the information disclosure rules of the HKEx and domestic regulatory authorities.” And he pointed out about the above questions, “Both issues were addressed in the company’s detailed results announcement on April 7. all investors and analysts can refer to CCB’s results announcement.

CCB’s result announcement can be downloaded from HKEx website and www.ccb.cn. This announcement has 50 pages and released all information of CCB’s results in 2005. In terms of income tax, the announcement said, “Tax authorities raise the Bank’s tax deduction limit for salary expenses in the year of 2005, which reduced income tax liability arising from non-tax-deductible staff costs from RMB 3,906 million in 2004 to RMB 403 million in 2005 accordingly.” In terms of foreign currency dealing loss, the announcement said, “We recorded a net loss in foreign currency dealing in 2005, primarily due to the effect of the appreciation of the RMB on the translation of USD denominated assets. This loss was substantially reduced by the foreign exchange derivatives utilized by us to hedge such risks.”

And some research reports of investment banks indicated that the majority of analysts are satisfied with CCB’s disclosure and have no doubts about the questions mentioned above.   A report by China International Capital Corp pointed out that the same policy has been granted to other offshore-listed mainland financial institutions, including Bank of Communications, and forecasted that CCB will continue to enjoy lower tax rate in 2006. And this report also predicted CCB’s forex loss in the coming two years based on its loss in 2005.

Tracy Yu, analyst from Lehman Brother, has no comments on other research reports and said that CCB plays by the rules. And as to the income tax and forex loss, both analysts denoted that CCB has drawn a clear picture over the above issues and has no doubts over them from their professional perspectives.

Chairman of CCB Mr. Guo Shuqing and President Chang Zhenming headed two teams to begin a two-week roadshow after the results announcement on April 7 to meet major institutional investors in Hong Kong, Singapore, Japan, the United Kingdom and the United States. So far, all feedbacks from the roadshow have been positive, Mr. Xi Deyan said.