Industrial Bank Co.Ltd(601166) (601166)
The new five-year plan sets sail to build a comprehensive financial service provider
Strategic layout: 1) Societe Generale takes the advantages of traditional peers as the starting point and is committed to deep cultivation of on balance sheet + expansion of off balance sheet. In terms of business logic, promote the outflow of on balance sheet assets, realize the docking of investment and financing needs, and comprehensively serve government and enterprise customers; On the one hand, investment banks have the advantages of providing enterprise customer resources for the balance sheet, on the other hand, enabling asset management and providing high-quality assets for wealth business; Retail services around the public customer base will help to improve customer stickiness and form a business ecological closed loop. 2) This year, we put forward a new five-year plan, continue to deepen the “1234” strategy, build the three brands of “green bank, wealth bank and investment bank”, and continue to focus on investment banks and wealth off balance sheet in the future. Green finance is an incremental focus. 3) “Bank platform” is an important starting point to establish payment and settlement business cooperation with small and medium-sized financial institutions. The open investment and financing environment enables the acquisition of on balance sheet and off balance sheet assets. At the same time, it forms a wide range of marketing channels and potential customers through Wuxi Online Offline Communication Information Technology Co.Ltd(300959) resource integration.
Commercial investment linkage enables the acquisition of assets inside and outside the balance sheet, and the company realizes the transformation of light investment banking mode from holding assets to managing assets around FPA. 1) Based on the legal person coverage of more than 90% of interbank customers, Industrial Bank Co.Ltd(601166) has built a huge interbank resource network to effectively drive the development of deposit custody and investment banking business. In terms of the debt commitment scale of NAFMII, the total underwriting scale of bonds ranked first in the market in 2020, and continued to be in the forefront of the industry in recent years; The trusteeship scale also continues to expand, among which the trusteeship scale of trust and securities companies is the second in the industry. 2) In the middle of this year, the balance of FPA was 6.53 trillion yuan, an increase exceeding the increase of total assets. The increase was mainly contributed by off balance sheet. Off balance sheet non-traditional FPA such as debt financing, equity and asset management reached 2.36 trillion yuan, an increase of 16%, accounting for 36.1% of the total FPA.
Wealth management is the only strategic priority of the bank
At the retail end, Industrial Bank Co.Ltd(601166) in balance sheet retail asset business and off balance sheet wealth management have been upgraded to the only strategic priority of the bank in 2020. Specifically reflected in: on the asset side, the integrated construction of underwriting + investment and research has strengthened the strength of asset management, and Puyi’s comprehensive financial management ability has ranked first among national banks for 16 consecutive quarters; On the liability side, open sales channels and expand customer radiation with the help of peer resources.
Under the condition of financial management + private banking, retail AUM accelerates its expansion. The group’s retail AUM reached 2.69 trillion yuan: 1) personal deposits and wealth products scored 37 points, and the off balance sheet assets under management accounted for 71.45% in 2021h1, of which retail wealth management accounted for 50.2%. Compared with China Merchants Bank, Societe Generale’s wealth management accounted for a higher proportion, and there is still room for improvement in the proportion of agency products. 2) AUM of private bank customers accounting for only 0.07% of the total retail AUM accounted for 27.4%, and their contribution continued to improve. 3) Recently, the private banking department has been approved to open as a branch level franchise organization, which will improve the efficiency of customer service; The roe of xingyin financial management is also much higher than the on balance sheet profitability.
In recent years, the proportion of non interest income has continued to increase, and roe has ushered in an inflection point
Industrial Bank Co.Ltd(601166) roe has fallen with the industry trend, but it has been higher than the average value of listed shares for a long time. Early interest income is the main contribution factor. After strict supervision, off balance sheet business has developed rapidly, the proportion of non interest income continues to be higher than the industry average, and the positive contribution of handling fee income and other non interest income to ROE also continues to increase.
Fee income structure: 1) the consultant fee is the largest source, involving investment banking and financial and asset management business. In 2020, the consultant category accounted for 31.5% of the fee income of RMB 42.5 billion, with a growth rate of more than 40%. 2) The contribution of agency business has also increased significantly in recent two years, mainly due to the contribution of wealth consignment income. 3) Credit card business has experienced rapid development since 2016, accounting for 28% in 2020, and has increased by 13pct in recent ten years. 4) The proportion of transaction service fee income has also continued to increase in recent years. Overall, the income from big investment bank and big wealth business involving the capital market accounted for 57.7% of the fee income, ranking in the forefront of joint-stock banks, reflecting the advantages of financial market and comprehensive financial business.
Investment advice
The five-year strategic plan is to enrich and expand on the basis of maintaining the company’s business advantages, consolidate the logical foundation and further support the enforceability of the strategy. At this stage, Industrial Bank Co.Ltd(601166) valuation repair ushered in various catalysis: 1) under the downward pressure of the economy, the countercyclical policy continued to hedge, which was conducive to the mitigation of the company’s overall credit risk, and the pessimistic expectations in the early stage were quickly repaired. 2) The issuance of 50 billion yuan of convertible bonds was completed at the end of the year, with a fast pace from preparation to approval. Although the profit index was slightly diluted in the short term, it further enriched the core Tier-1 capital (the implementation of share conversion is expected to boost the core Tier-1 capital adequacy ratio by 0.8pct) and reserved ammunition for long-term growth. At the same time, the share price of 25.51 yuan is basically equivalent to that of BPs in 2020. Considering the factors such as share conversion in the future, The share price still has a lot of room to improve. We maintained the forecast of the company’s revenue of 233.171/260.322/292.783 billion yuan and the forecast of net profit attributable to the parent company of 78.149/95.407/115.234 billion yuan from 21 to 23, with the corresponding growth rates of 17.3% / 22.1% / 20.8% respectively; Maintain Eps3 for 21-23 years The forecast of 63 / 4.46 / 5.41 yuan corresponds to the closing price of 19.05 yuan / share on December 30, 2021, and Pb is 0.68/0.61/0.54 times respectively, maintaining the “buy” rating.
Risk statement
1) The risk that the future economic recovery is less than expected and the credit cost continues to rise significantly;
2) Major risks at the company’s operation level, etc.
