China International Capital Corp. Ltd. (3908.HK): Merger Completed; Payout Ratio Raised

We remain constructive on potential synergies that can be extracted in the next 12 months: we see net capital doubling and think it can be levered up more at CICC, benefiting capital-heavy equity trading, derivatives and prime brokerage business; CICC has already announced a Rmb4.2bn capital injection into its HK subsidiary two months ago. Management said it is looking to higher-margin loan balance and net interest income, subject to client demand, as part of the merger, and sees a ~50% retail customer increase and >80% increase in branch coverage. CICC sees Rmb1.5-2bn revenue potential if Dongxing and Cinda's wealth management productivity can rise to a level similar to CICC's after the merger, with wealth integration already ongoing for several months. CICC said the share swap to merge Dongxing and Cinda completed on 26 Oct;