20161028-美银美林-工商银行-01398.HK-Prudent_growth_and_stabilizing_NIM,Buy_12页_751kb

报告摘要

ICBC Financial Summary and Investment Analysis

Core Content

ICBC (Industrial and Commercial Bank of China) reported robust financial performance in the first nine months of 2016 (9M16), with a net profit increase of 0.5% YoY to RMB222.8 billion, representing 85% of the FY16E estimate. Core earnings also rose by 0.4% YoY, accounting for 79% of the FY16E. The bank maintained a high Return on Equity (ROE) of 16.7%, and its Common Equity Tier 1 (CET1) ratio stood at 12.6%, indicating a strong capital position.

Despite a decline in the net interest margin (NIM) by 3 basis points (bps) QoQ to 2.12%, ICBC outperformed its peers, such as CCB and BOC, which saw larger drops. The NIM decline was attributed to deposit re-pricing, and management expects further support from this trend in the coming quarters. Net interest income rebounded by 1.4% QoQ, marking the first sequential recovery in three quarters.

Loan and deposit growth remained prudent, with loans rising 1.9% QoQ and deposits 2.2% QoQ, while assets grew by 0.5% QoQ. Mortgage loans were the primary driver of loan growth, with an average loan-to-value (LTV) of 59% at the time of granting and 50% for the outstanding loan book. Net fee income declined by 16% QoQ, and YoY growth slowed to 2%. However, the Cost-Income (C-I) ratio improved by 3.2 percentage points (ppt) YoY to 27.3%, reflecting strong cost control.

Credit Quality and Risk Management

The Non-Performing Loan (NPL) size increased by 6% QoQ or 16% YTD, and the NPL ratio rose by 7bps to 1.62%. Management anticipates continued challenges in asset quality, with no near-term turning point. Credit costs declined from 71bps in 1H16 to 61bps in 3Q16 (or 68bps for 9M16), aligning with CCB and BOC levels. The NPL and loan reserve coverage ratio dropped to 136%, which is below the 150% threshold for the past three quarters. The report notes that while the 150% requirement may be abolished, ICBC is expected to maintain prudent provisions for 2017-2018.

Valuation and Investment Outlook

ICBC is rated Buy due to its strong balance sheet, deposit franchise, and prudent growth strategy. The report maintains unchanged earnings estimates and provides a price objective of 6.16 HKD for H-shares and 5.48 CNY for A-shares.

Key valuation metrics for Dec 2016 include:

P/E ratio: 5.5x for 2016E, 5.2x for 2017E, and 4.9x for 2018E
Dividend Yield: 5.45% for 2016E, rising to 6.48% for 2018E
Pre-exceptional P/E: 5.56x for 2016E, 5.47x for 2018E
Price/Book (PB): 0.764x for 2016E, declining to 0.628x for 2018E
RoE/PB: 19.05x for 2016E, increasing to 21.23x for 2018E
Price / Pre-Provision Profit: 3.54x for 2016E, decreasing to 2.96x for 2018E

Key Financial Metrics

Metric	2014A	2015A	2016E	2017E	2018E
Net Income (Adjusted - mn)	275,811	274,800	261,814	275,540	292,261
EPS	0.783	0.774	0.735	0.773	0.820
EPS Change (YoY)	4.4%	-1.1%	-5.1%	5.2%	6.1%
Dividend / Share	0.255	0.233	0.220	0.232	0.262
Pre-exceptional EPS	0.776	0.768	0.728	0.765	0.812
Pre-exceptional EPS Change (YoY)	4.5%	-1.1%	-5.2%	5.2%	6.0%
Book Value / Share	4.23	4.80	5.30	5.85	6.44

Key Balance Sheet Data

Metric	2014A	2015A	2016E	2017E	2018E
Total Assets	20,609,953	22,209,780	24,066,475	26,105,736	28,217,267
Tier 1 Capital	1,521,233	1,781,062	1,981,692	2,192,841	2,410,404
Tangible Equity	1,496,431	1,710,099	1,888,763	2,085,759	2,295,358
Common Shareholders' Equity	1,496,431	1,710,099	1,888,763	2,085,759	2,295,358

Key Metrics

Metric	2014A	2015A	2016E	2017E	2018E
Net Interest Margin	2.66%	2.47%	2.18%	2.15%	2.16%
Tier 1 Ratio	12.2%	13.5%	13.9%	14.2%	14.3%
Effective Tax Rate	23.6%	23.5%	23.5%	23.5%	23.5%
Loan / Assets Ratio	53.5%	53.7%	54.0%	54.0%	54.0%
Loan / Deposit Ratio	70.9%	73.3%	74.5%	75.6%	76.2%
Operating Leverage	2.5%	4.3%	6.5%	3.0%	1.4%
Gearing (Assets / Equity)	13.8x	13.0x	12.7x	12.5x	12.3x
Tangible Common Equity / Assets	7.3%	7.7%	7.8%	8.0%	8.1%
Tangible Common Equity / WRAs	12.0%	12.9%	13.3%	13.5%	13.6%
Revenue Growth	9.7%	5.3%	-3.4%	7.6%	9.0%
Operating Expense Growth	7.1%	1.0%	-9.8%	4.6%	7.5%
Provisions Expense Growth	47.7%	52.9%	16.0%	22.2%	20.3%
Operating Revenue / Average Assets	3.2%	3.1%	2.8%	2.8%	2.8%
Operating Expenses / Average Assets	1.1%	1.0%	0.9%	0.8%	0.8%
Pre-Provision ROA	2.1%	2.1%	1.9%	1.9%	2.0%
ROA	1.4%	1.3%	1.1%	1.1%	1.1%
Pre-Provision ROE	29.6%	26.8%	23.6%	23.3%	23.1%
ROE	19.9%	17.1%	14.5%	13.9%	13.3%
RoTE	18.4%	16.1%	13.9%	13.2%	12.7%
RoWRAs	2.2%	2.1%	1.8%	1.8%	1.7%
Dividend Payout Ratio	32.6%	30.1%	30.0%	30.0%	32.0%
Efficiency Ratio (Cost / Income Ratio)	34.0%	32.9%	30.7%	29.9%	29.5%
Total Non-Interest Inc / Operating Inc	22%	24%	27%	27%	28%
Loan Loss Reserves / NPLs	206.9%	156.3%	110.3%	75.4%	53.8%
Loan Loss Reserves / Total Loans	2.4%	2.4%	2.3%	2.1%	1.9%
Provisions Expense / Average Loans	0.5%	0.7%	0.8%	0.9%	1.0%

Investment Rationale

ICBC is positioned as a Buy due to its strong balance sheet, deposit franchise, and capital position, which make it a defensive core holding amidst rising policy risks. The bank's prudent growth strategy and ability to stabilize NIM contribute to its resilience in the current economic environment. The report also highlights the potential for further cost control and the gradual improvement in credit costs.

Conclusion

ICBC continues to perform well despite a challenging environment, with a strong capital position and a resilient profitability profile. While credit costs remain a concern, the bank is expected to manage them effectively. The management's guidance and the bank's financial structure support its continued growth and stability, making it an attractive investment opportunity.

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