\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 036 China Merchants Bank Co.Ltd(600036) )
Event overview:
China Merchants Bank Co.Ltd(600036) release the annual report: in 2021, the operating revenue was 331253 billion yuan (+ 14.04%, YoY), the operating profit was 148019 billion yuan (+ 20.69%, YoY), and the net profit attributable to the parent company was 119922 billion yuan (+ 23.20%, YoY); At the end of 2021, the total assets were 9.25 trillion yuan (+ 10.62%, yoy; + 3.72%, QoQ), deposits were 6.35 trillion yuan (+ 12.77%, yoy; + 5.57%, QoQ), and loans were 5.57 trillion yuan (+ 10.76%, yoy; + 1.25%, QoQ). Retail AUM 10.76 trillion yuan (+ 20.33%, YoY); 2021a net interest margin 2.48% (- 1bp, YoY), Q4 net interest margin 2.48% (+ 1bp, QoQ); The non-performing loan ratio is 0.91% (- 2bp, QoQ), the provision coverage ratio is 483.87% (+ 40.73pct, QoQ), and the capital adequacy ratio is 17.48% (+ 1.12pct, QoQ); Annual roe16 96%(+1.23pct， YoY)。 The proposed cash dividend is 1.522 yuan / share, with a dividend rate of 33%.
Analysis and judgment:
Revenue accelerated in the fourth quarter, and wealth management contributed more than half of the medium income in the whole year; Q4 impairment and less provision of enabling profit elastic space
On the revenue side, the cumulative revenue in 2021 was + 14% year-on-year, and increased by 0.5pct on the basis of the growth rate in the first three quarters. The acceleration of revenue in the fourth quarter was mainly due to: 1) the volume and price of interest business increased at the end of the year, driving the net interest income Q4 to increase by 14.6% year-on-year in a single quarter and 7pct month on month in Q3. The annual net interest income achieved a double-digit growth rate of 10.2%. 2) Non interest income continued to be stable. Although the quarterly high growth rate of investment non commission income decreased due to the low base disturbance of fair value change subjects, the handling fee income and other non interest income of China Merchants Bank in the whole year were + 18.8% / + 30.9% year-on-year respectively, driving the proportion of non interest income income at the revenue end of the whole year to increase 2pct to 38.4% compared with 2020A, ranking in the forefront of listed banks. Specifically focus on the income structure. This annual report subject fine-tuning further subdivides the original “agency service, trusteeship and other entrusted and other” subjects into “wealth management, asset management, trusteeship business and others”. The annual growth rate of wealth management income dominated by agency sales income, asset management income dominated by subsidiary fund wealth management and trusteeship business income is 29% / 58% / 28% respectively, In total, it contributed 51% of the total commission income. Although the scale of non commodity base, trust and insurance on a commission basis decreased slightly due to the influence of the market, the income from agency funds, insurance and wealth management on a commission basis contributed 36.2% / 42.8% / 53.7% respectively; Overall bank card transactions decreased slightly by 0.89% year-on-year.
While accelerating the revenue, thanks to the stable and excellent asset quality, the annual impairment provision of China Merchants Bank slowed down. In 2021, the provision scale increased only slightly by 2% year-on-year, in which the provision for loan impairment was 21% less year-on-year, the impairment losses of interbank and off balance sheet were mainly prospectively increased, and the overall non credit impairment was 62% more year-on-year, accounting for 44% of the total impairment losses of the whole year. In Q4, the impairment loss in a single quarter was only 10.1 billion yuan (year-on-year – 19%), and the provision for credit was increased structurally. At the same time, the impairment of non credit was negative, reflecting the overall margin of safety or more fully. With less impairment, the annual net profit attributable to the parent increased by 23.2%, a new high in recent six years, further increased by 1PCT compared with the first three quarters, and the profit growth in Q4 was 26.8%, which was also higher than the overall level of joint-stock banks disclosed by the CBRC. In 2021, the roe of the company increased by 1.23pct to 16.96%. We believe that the landing of business results under the consistency of strategic implementation is the basis for CMB to maintain a stable revenue end. Under the fine operation of customer base, excellent risk control and quality assurance performance release space.
In the fourth quarter, we increased matching public loans, increased the amount of deposits and improved the quality of deposits, which contributed to the stabilization and recovery of interest rate spread on a month on month basis
Asset side: in the fourth quarter, the table expansion speed increased significantly, and the asset scale increased by + 3.7% month on month, of which the loan scale increased by 1.3% steadily. While the scale of investment assets decreased slightly, interbank assets were mainly allocated. The growth rates of total assets and loans in the whole year were 10.5% and 10.8% respectively, and the investment assets were only + 4.4%, mainly because the non-standard investment scale fell by more than half. Upward loan investment: 1) throughout the year, the annual growth rates of public and retail loans were 6.6% and 11.4% respectively. At the end of the year, the proportion of overall asset side loans and retail loans in loans were 57.7% and 53.6% respectively, both slightly higher than that at the beginning of the year. Among retail loans, mortgage growth slowed down by only 7.8%, mainly due to the growth of credit cards and small and micro loans by 12.5% and 18.1% respectively. 2) In a single quarter, the provision of corporate loans improved in the fourth quarter. Among the 68.9 billion yuan of new loans in Q4, the bill scale decreased significantly, while 57.2 billion yuan and 39.8 billion yuan were added to public and retail respectively. The increment of retail loans is mainly invested in mortgage. Under the caliber of the parent bank, 82% of Q4 retail increment is invested in mortgage, and the scale of other individual loans including joint loans continues to drop. 3) In terms of the public loan industry, in 2021, the loan scale of wholesale and retail, mining and financial industries decreased compared with that at the beginning of the year, mainly adding manufacturing and infrastructure. Among the 133.7 billion yuan of public loan increment, the increment of manufacturing and transportation and storage accounted for 62%, and the decrease of real estate loan was concentrated in the second half of the year, accounting for 0.7pct to 18.7% compared with that at the beginning of the year. Overall, while maintaining the retail structure of more than half of the loans in the whole year, corporate loans shifted from medium-term notes to more general corporate loans at the end of the year, reflecting the strong asset acquisition ability of China Merchants Bank. Under the advanced method, the company’s core capital adequacy ratio was 12.66% in 2021, up 35bp from Q3.
Liability side: Deposits performed well in the fourth quarter, which is the main factor supporting the expansion of the balance sheet. After the pressure drop in the third quarter, Q4 expanded again, and the deposit scale was + 5.5% month on month, which was significantly higher than that in the third quarter. The year-on-year growth rate of deposits was 12.7%, higher than the growth rate of about 10% of total assets and loans. The proportion of liabilities side deposits further increased to a new high of 76%, and the liability structure continued to be optimized. In terms of deposit structure, more than 90% of the increase in deposits in the fourth quarter was demand deposits, which was mainly contributed by corporate demand deposits. Demand deposits accounted for 65.9% at the end of the year, an increase of 0.5pct compared with 2020; The daily average balance of demand deposits accounted for 64.5% of the total daily average balance of deposits, an increase of 4.5pct year-on-year. While core deposits performed well, the balance of structured deposits decreased from the beginning of the year, and the proportion of time deposits decreased 2pct to 12%.
Net interest margin: the company disclosed that the net interest margin of 2021a was 2.48%, a year-on-year decrease of 1bp, of which the net interest margin of Q4 in a single quarter was 2.48%, which continued to rise 1bp compared with Q3. It has stabilized and rebounded during the year, with a year-on-year increase of 7bp compared with 20q4.
On the one hand, the loan yield and the overall return on the asset side have stabilized month on month in the fourth quarter. On the other hand, although the deposit cost rate still rises by 1bp month on month, thanks to the optimization of debt structure and the decline of active debt cost under wide liquidity, the interest payment cost rate is also flat Q3 month on month. Throughout the year, the stabilization of interest rate spread is the joint action of pricing and structure. While the activation degree of deposits is improved, the interest rate of time deposits is 18 bp lower than that in 2020, hedging the decline of asset side yield.
In the fourth quarter, the adverse continued to decline, but the structure was exposed, and the risk resistance level continued to improve
In terms of asset quality: 1) in the fourth quarter, the non-performing continued to decline, with the scale decreasing by 1% month on month, while the non-performing rate decreased by 2bp to 0.91%. 2) In terms of leading indicators, the proportion of concerned loans increased slightly by 2bp to 0.84% month on month (Q3), but it was at an industry low level; The corresponding overdue loans accounted for 1.03%, a slight increase of 1bp compared with the previous two quarters. The improvement of the company’s disclosure indicators is mainly due to the pre pilot recognition of overdue credit cards and the tightening of recognition standards for concerned categories. Combined with the company’s 90 + / non-performing, the overall recognition is more cautious. 3) In terms of structure, with the increase of disposal efforts, the non-performing rate of corporate loans at the end of the year was 1.24%, which was 34bp lower than that at the beginning of the year; The non-performing ratio of Q4 corporate loans of the parent bank fell by 16bp month on month, and the proportion of concerned and overdue loans was 0.56% and 1% respectively, which was also low. The non-performing ratio of retail loans remained at 0.81% at the beginning of the year, but it was 5bp higher than that in the medium term; The non-performing rates of various types of retail loans under the parent bank’s caliber have decreased compared with the beginning of the year, but they have fluctuated since the second half of the year. The non-performing rates of Q4 mortgage, credit card and small and micro loans have increased by 4bp / 11bp / 3bp respectively month on month, while the non-performing rates of other types of retail loans have increased, mainly due to the transfer of online joint loans in consumer loans to other types of statistics, which has dragged down the overall performance of retail loans under the scale pressure drop. 4) At the industry level, the non-performing rate of corporate loans decreased in all industries, and the fluctuation mainly came from the real estate field. Affected by the macro environment and industry supervision, the non-performing rate increased by 12bp to 1.41% month on month compared with Q3, but the related risks were controllable, mainly from the control of exposure and structure in the real estate field. The balance of real estate related business bearing credit risk at the end of the year was 511.5 billion yuan, with a decrease of about 9 billion yuan month on month compared with Q3, with an annual increase of only 3.48%; Among them, the loan to public real estate was 356 billion yuan, accounting for 6.78% of the total loan, a further decrease of 0.15 PCT month on month compared with Q3, while the scale of entrusted loan, consignment trust and other types of products without risk also decreased by more than 20% compared with the previous year. 5) The non-performing generation rate of China Merchants Bank in 2021 was 0.95%, a year-on-year decrease of 31bp. Under the low non-performing generation, the impairment provision and write off slowed down, and the credit cost rate was only 0.7%. At the same time, the provision coverage rate was 483.87%, with an annual increase of more than 46pct.
The strategic framework of light banks is clear, and the retail AUM is steadily expanded
The company’s annual report further interprets the 3.0 model, and puts the operation mode of the company’s “light bank” into the “business mode of big wealth management + digital operation mode + open and integrated organization mode”, which has achieved a good start as a whole:
1) wealth management accumulated a lot and made little progress. At the end of the year, the number of retail customers reached 173 million, with annual growth rate and Q4 single quarter growth rate of 9.5% and 2.4% respectively. Customers above sunflower and private bank customers increased by 18.4% and 22.1% respectively. In terms of scale, at the end of the year, the retail AUM steadily expanded to 10.76 trillion yuan, with a quarter on quarter growth rate of 3.7%, an annual growth rate of more than 20%, and the retail AUM / total assets reached 116%, an increase of 9.4pct over the beginning of the year, unchanged Q3. Structurally, 82% of the annual increment of retail AUM came from customers above sunflower. The overall average household AUM increased by 800 yuan to 62200 yuan month on month compared with Q3, of which the private AUM increased by 3.9% in a single quarter and the average household AUM was 27.8 million yuan. In addition, China Merchants Bank Co.Ltd(600036) + handheld life apps have 297 million cumulative users, with an annual growth rate of 16.5% and 111 million Maus.
2) while operating and expanding the asset side of public customers, it also contributed to good deposit precipitation, and the retail advantage further enabled the public business, including driving the annual increase of the scale of custody business by 21% to 19.46 trillion yuan. In 2021, the number and scale of custody of newly issued public funds ranked first in the market; The total scale of asset management of four subsidiaries, including China Merchants Bank financial management and China Merchants Fund, reached 4.31 trillion yuan, with an annual increase of 15%. Among them, the management balance of CMB financial management is 2.78 trillion yuan, with an annual growth rate of 13.47%, realizing a net profit of 3.2 billion yuan and an annualized roe of 35%.
3) the open and integrated organizational model includes the pilot of “wide post mechanism” for retail lines (opening up the post authority of market expansion, wealth management, retail credit, credit card and other positions), and the pilot of “project-based operation” for wholesale lines (establishing “virtual departments” around core customers and their investment chain and industrial chain enterprises, and members from customers, products, risk departments and different branches share the division of responsibilities). The customer-centered development model is expected to further tap the value of existing customers in addition to the operation increment.
Investment advice
Generally speaking, the performance of China Merchants Bank Co.Ltd(600036) annual report is beautiful, and the highlights deserve attention: 1) stable price rise and rapid growth of medium income in the four seasons contribute to the acceleration of revenue growth; 2) The proportion of loans and deposits at both ends of negative assets continued to increase, and in the fourth quarter, on the one hand, the investment in corporate loans was good, on the other hand, deposits performed well, which further contributed to the recovery of interest margin on a month on month basis; 3) With the continuous improvement of the apparent data of asset quality and the sufficient provision for off balance sheet impairment, the overall credit cost has decreased to a low level, and the appropriation coverage rate has naturally increased significantly; 4) The strategy of light banking has been promoted in depth, customer coverage and business volume have been continuously realized, and enabled asset acquisition and deposit precipitation.
We continue to be optimistic about the performance driven by the great wealth management value cycle chain of “wealth management asset management investment bank” of China Merchants Bank, and pay attention to the contribution of technology driven and organizational model reform to the overall strategic implementation efficiency in the future. In view of the performance of the annual report, we slightly adjusted the forecast of the company’s revenue of 3628 / 4102 / – billion yuan in 22-24 years to 3659 / 4124 / 469.5 billion yuan, and the forecast of net profit attributable to the parent company of 1367 / 1600 / – billion yuan in 22-24 years to 1379 / 1609 / 188.8 billion yuan, with a corresponding growth rate of 15.0% / 16.6% / 17.3%; 22-24 years eps5 The forecast of 35 / 6.28 / – yuan is 5.40/6.32/7.42 yuan, corresponding to the closing price of 46.17 yuan / share on March 18, 2022, and Pb is 1.41/1.25/1.10 times respectively. At present, the market capital has disturbed the company’s PB callback, and the space for valuation recovery has been opened to maintain the company’s “buy” rating.
Risk tips
1. The risk that the future repair of the overall economy is less than expected and the credit cost increases significantly;
2. Major business risks of the company.
