\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 036 China Merchants Bank Co.Ltd(600036) )
Event: on March 18, China Merchants Bank Co.Ltd(600036) released its annual report for 2021. The annual revenue / profit before provision / net profit attributable to parent company reached 331.25/218.75/119.92 billion, with a year-on-year increase of 14.0% / 14.4% / 23.2% respectively. ROA and roe were 1.36% and 16.96%, with a year-on-year increase of 0.13pct and 1.23pct respectively.
Driven by both net interest income and non interest income, the revenue maintained a high growth. Thanks to the steady growth of net interest income and the rapid growth of non interest income, the company’s revenue increased by 14% year-on-year in 2021, maintaining a rapid growth. From the perspective of “stable growth rate of interest: the company’s net income increased by 10.2% year-on-year”. 2) The rapid growth of handling fee income from wealth management, asset management and custody business led to a year-on-year increase of 18.82% in medium income and 26.66% in other non interest income. Non interest income accounted for 38.44% of the revenue, with a year-on-year increase of 2.14 PCT; Reflected in the transformation of the big wealth management business model, the contribution of non interest income has been increasing, and the company’s operation has become lighter.
Thanks to cost control and asset structure optimization, the net interest margin remained basically stable. In 2021, the company’s net interest margin was 2.48%, down 1bp year-on-year and flat month on month; The net interest margin remained stable as a whole, escorting the steady growth of net interest income. Under the background of downward loan pricing trend in the industry, fierce deposit competition and narrowing pressure on the net interest margin, the company continued to optimize the asset liability structure, strengthen debt cost control and maintain the stability of the net interest margin. Asset side: the proportion of high-yield assets such as loans and retail loans has increased, and the downward pressure on asset side prices has been eased; The rate of return on loans and the rate of return on interest bearing assets decreased by 22bp and 15bp respectively year-on-year. Liability side: the deposit structure has been continuously optimized, and the proportion of low-cost core deposits has increased (the average daily balance of the company’s core deposits accounted for 87.26% of the average daily balance of customers’ deposits in 2021, an increase of 5.13pct over the previous year); The interest payment rate of deposits and interest bearing liabilities decreased by 14bp year-on-year.
Recently, LPR has been continuously lowered, and there is downward pressure on bank loan pricing; Deposit competition is still fierce, debt costs are rigid, and the net interest margin of the banking industry is still under pressure to narrow. It is expected that this year, the company will continue to optimize the asset liability structure and stabilize the price through structural adjustment. At the same time, driven by the policies of steady growth and wide credit, the scale decline will maintain rapid growth, and it is expected to achieve volume increase and price stability.
The value cycle chain of big wealth management operates efficiently, driving the rapid growth of handling fee income. 2021 is the first year of great wealth management of China Merchants Bank. The company’s “wealth management asset management investment bank” value cycle chain operates efficiently, realizing the rapid growth of wealth management, asset management, asset custody scale and handling fee income. At the end of the year, the number of retail customers exceeded 20 trillion, with a year-on-year increase of AUM of 10.33%; The scale of asset management exceeded 4 trillion, with a year-on-year increase of 14.92%; The scale of asset custody was close to 20 trillion, with a year-on-year increase of 21.25%. The annual net fee and commission income was 94.447 billion, a year-on-year increase of 18.82%. Among them, the income from wealth management was 35.841 billion, a year-on-year increase of 29%; The income from selling funds on a commission basis, insurance and financial management has achieved rapid growth. The revenue from asset management was 10.856 billion, a year-on-year increase of 57.52%; This is mainly due to the increase in the handling fee income of China Merchants Bank financial products and the increase in the management fee income of China Merchants Fund and China Merchants Bank International Fund. The revenue from custody business was 5.433 billion, a year-on-year increase of 27.75%.
The overall asset quality continued to improve, and the risks in the real estate sector were released smoothly. By the end of 2021, the non-performing loan balance and non-performing loan ratio of China Merchants Bank had both decreased, and the non-performing loan ratio decreased by 16bp to 0.91% compared with the end of the previous year. In terms of breakdown, the non-performing ratio of corporate loans decreased by 34bp to 1.24% compared with the end of the previous year, and the non-performing ratio of retail loans remained unchanged at 0.81%. Among them, the non-performing rate of public real estate loans increased compared with the end of last year due to the impact of real estate regulation policies and the decline of industry prosperity. At present, the company continues to strengthen risk control in the real estate field and adjust the structure of customers and regional assets. It is expected that the risks in the real estate field will be released smoothly and the impact on the overall asset quality will be controllable. The concerned loan ratio increased by 3bp to 0.84% compared with the end of last year, which is mainly related to the adjustment of the identification time point of overdue credit card loans, and the overall potential non-performing pressure is small. The provision coverage rate was 483.87%, an increase of 46.19 PCT over the end of the previous year; Sufficient risk offset.
Investment suggestion: the China Merchants Bank Co.Ltd(600036) “3.0 model” will start steadily in 2021, and the value cycle chain of big wealth management will operate efficiently, driving the continuous high growth of customer AUM and related medium income; The overall quality of assets continued to improve, risks in the real estate sector were released smoothly, and full caliber provisions were sufficient. We expect the net profit attributable to common shareholders to increase by 20.5% / 16.3% year-on-year in 2022 / 2023, corresponding to BVPs of 34.69/41.32 yuan / share respectively. We are optimistic about the leading business model, operation model and organization model of China Merchants Bank. The value cycle chain of big wealth management is expected to continue to exert its strength and consolidate the company’s market competitiveness. Give 1.8 times of 2022 Pb, corresponding to the target price of 62.44 yuan / share, and maintain the “strongly recommended” rating.
Risk tip: the economic stall and downturn lead to the deterioration of asset quality; Unexpected changes in regulatory policies, etc.
