Ping An Bank (000001 CH) Company Update Summary
Core Content
Ping An Bank (PAB) reported a 1H20 net profit decline of 11.2% YoY to RMB13.7bn, with a 2Q20 earnings shrink of 35.5% YoY, primarily due to a 57.6% YoY increase in provisions. Despite this, the bank showed resilience in core earnings and improved operating efficiency.
Key Financial Highlights
Revenue and Profitability
- PPoP growth reached 18.4% YoY, outperforming sector peers.
- Non-interest income increased 19.1% YoY, driven by 13.6% YoY growth in net fee income and 34.2% YoY growth in trading and investment returns.
- Revenue structure improved, with non-interest income contributing 36.8% (up 2.1ppt QoQ).
- Cost-income ratio fell 2.5ppt YoY to 27.7%, indicating better efficiency.
- Net profit declined 11.4% QoQ to RMB27.3bn in FY20E, with a 15.9% drop in EPS to RMB1.36.
Capital and Asset Quality
- NPL ratio remained stable at 1.65%, with provision coverage rising to 215% (up 15ppt QoQ), higher than the joint-stock banks' average of 204%.
- Credit card NPL ratio increased by 3bp QoY, while corporate NPL ratio decreased by 5bp QoY.
- Capital adequacy ratio (CAR) declined, with CET-1 CAR dropping 27bp QoY to 8.9% and total CAR falling 31bp QoY to 12.4%.
Operational Performance
- Credit extension grew 2.4% QoQ, with retail loan growth recovering to 3.6% QoQ.
- Mortgage, auto finance, and personal business loans saw significant growth: +6.0%, +11.0%, and +15.1% QoQ, respectively.
- Retail client base expanded steadily, with retail/wealth/PB client numbers increasing by 3.1% / 7.7% / 8.5% QoQ.
- Retail AUM increased 8.6% QoQ to RMB2.32tn.
Key Ratios
| Metric |
FY18A |
FY19A |
FY20E |
FY21E |
FY22E |
| Net interest income |
64% |
65% |
66% |
65% |
65% |
| Net fee income |
27% |
27% |
27% |
28% |
30% |
| Operating income |
10.3% |
18.2% |
12.8% |
10.0% |
10.6% |
| Net profit |
7.0% |
13.6% |
-3.1% |
17.8% |
19.7% |
| NPL ratio |
1.75% |
1.65% |
1.68% |
1.61% |
1.54% |
| Provision coverage |
155% |
183% |
215% |
249% |
280% |
| CET-1 CAR |
8.5% |
9.1% |
10.0% |
9.9% |
9.8% |
| ROE |
11.3% |
11.1% |
9.3% |
10.1% |
11.0% |
Key Risks and Negatives
- Deposits declined 3.1% QoQ, pushing LDR to 100%.
- Structured deposits remained at a high proportion of 22.4%.
- NIM narrowed 1bp QoQ to 2.59%, due to asset yield contraction outweighing funding cost retreat.
- Earnings momentum slowed, with pre-tax profit declining 35.8% YoY to RMB6.66bn in 2Q20.
Earnings Forecast Adjustments
| Metric |
Old |
New |
Change |
| Credit cost |
2.56% |
2.80% |
+24bp |
| Net profit (RMB mn) |
31,918 |
27,319 |
-14.4% |
| EPS (RMB) |
1.62 |
1.36 |
-15.9% |
| Credit cost |
2.45% |
2.65% |
+20bp |
| Net profit (RMB mn) |
36,485 |
32,193 |
-11.8% |
| EPS (RMB) |
1.87 |
1.61 |
-13.7% |
Investment Recommendation
- Maintain BUY with a revised target price of RMB18.9 (down from RMB19.8).
- Up/Downside is +30.7% from the current price of RMB14.46.
- The target P/B ratio is 1.24x, down from 1.28x.
- FY20E BVPS is RMB15.3, reflecting the updated credit cost assumptions.
Analyst and Contact
Stock Data
| Metric |
Value (RMB mn) |
| Market Cap |
280,610 |
| Avg 3 mths t/o |
2,063 |
| 52w High/Low |
17.6 / 11.91 |
| Total Issued Shares |
19,406 |
Shareholding Structure
| Holder |
% Ownership |
| Ping An Group |
57.9% |
| China Securities Finance |
2.2% |
| Huijin |
1.1% |
Share Performance
| Period |
Absolute |
Relative |
| 1-mth |
6.4% |
1.9% |
| 3-mth |
10.2% |
-9.3% |
| 6-mth |
-4.1% |
-17.0% |
| 12-mth |
0.8% |
-19.3% |
Analyst Certification
The analyst certifies that the views expressed reflect personal opinions and that no compensation was linked to the report's content. The analyst has not traded in the stock within 30 days prior to the report and will not trade within 3 business days after issuance.
CMBIS Ratings
- BUY: Potential return of over 15% over next 12 months.
- HOLD: Potential return of +15% to -10% over next 12 months.
- SELL: Potential loss of over 10% over next 12 months.
- OUTPERFORM: Industry expected to outperform the relevant broad market benchmark.
- MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark.
- UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark.
Important Disclosures
- The report is not tailored to individual investors.
- Past performance does not guarantee future results.
- CMBIS does not assume liability for reliance on the report.
- The information is subject to change and may not be accurate or complete.
- CMBIS may have conflicts of interest and does not provide investment advice.
CMB International Securities Limited
- Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong
- Tel: (852) 3900 0888
- Fax: (852) 3900 0800
- Ownership: A wholly owned subsidiary of CMB International Capital Corporation Limited (a subsidiary of China Merchants Bank).
Regulatory and Distribution Notes
- UK: Report is provided to persons under Article 19(5) or Article 49(2)(a) to (d) of the Order.
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