\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 036 China Merchants Bank Co.Ltd(600036) )
Matters:
China Merchants Bank Co.Ltd(600036) released the 2021 annual report. In 2021, the annual operating revenue was 331.3 billion yuan, with a year-on-year increase of 14.04%, and the net profit attributable to the parent company was 119.9 billion yuan, with a year-on-year increase of 23.20% and roe16.5% 96%, up 1.23pct from last year. At the end of the year, the total assets were 9.25 trillion yuan, an increase of 10.62% over the end of the previous year. The profit distribution plan of the company in 2021 is: the proposed cash dividend per share is 1.522 yuan (including tax), and the dividend rate is 33.00%.
Ping An View:
Profits increased steadily, and the advantages of wealth and asset management continued to consolidate. In 2021, the company achieved a year-on-year increase in net profit of 23.2% (vs + 22.2%, 21q3) and a year-on-year increase in revenue of 14.0% (vs + 13.5%, 21q3). In terms of structure, net interest income and intermediate income have a positive contribution to the growth of annual revenue. Net interest income increased by 10.2% (vs + 8.7%, 21q3) year-on-year, with a steady increase in growth. The net fee and commission income increased by 18.8% (vs + 19.7%, 21q3) year-on-year, and the growth rate remained at a high level, mainly driven by the income from large wealth management: 1) the agency fee income was the largest contributor, with a year-on-year increase of 29.0%, and its proportion in the medium income increased by 3.0pct to 35.0%. The year-on-year growth rate of agency fund, insurance and wealth management income exceeded 35%, reflecting the company’s continuous and stable business advantages in wealth management. 2) Asset management business developed well, with asset management fee income increasing by 57.5% year-on-year, accounting for 2.7pct to 10.6% of the medium income, mainly relying on the strong growth of the income of asset management sectors such as subsidiary Investment Promotion Fund and China Merchants Bank financial management.
The month on month improvement of interest margin is better than that of peers, and the deposit and loan structure is continuously optimized. The company’s net interest margin in 2021 was 2.48%, down 1bp year-on-year, and the net interest margin in Q4 was 2.48%, up 1bp month on month compared with Q3. It is expected to perform better than peers. We think it can be attributed to the common effect of stabilizing the loan yield on the asset side and reducing the deposit cost on the liability side. From the perspective of assets, the loan yield in 2021 was 4.67%, down 22bp year-on-year. Affected by the repeated decline of LPR, it was consistent with the overall trend of the industry. However, we noticed that the annualized yield of Q4 single quarter loans was 4.64%, flat month on month compared with Q3, showing a stabilizing trend. We believe that thanks to the continuous optimization of the company’s loan structure, retail loans with higher yield accounted for 56.7% of the new loans in 2021; The overall cost of the liability side decreased. In 2021, the cost ratio of interest bearing liabilities decreased by 14bp year-on-year, including the deposit cost ratio of 1.41%, a year-on-year decrease of 14bp. In Q4, the cost of interest bearing liabilities and deposit cost in a single quarter remained stable compared with Q3, reflecting the company’s solid storage capacity.
On the asset side, the company’s total assets increased by 10.6% (vs + 9.3%, 21q3) year-on-year at the end of 2021, and the growth rate of Q4 single quarter scale increased by 3.4pct compared with Q3. In terms of loans, the company’s total loans at the end of 2021 increased by 10.8% (vs + 9.9%, 21q3) year-on-year, maintaining a stable expansion. In terms of loan structure, the proportion of retail loans at the end of 2021 increased by 0.3pct to 53.6% compared with that at the end of the previous year, among which the high-yield retail loan business maintained a high growth. Small and micro loans and credit card loans increased by 18.1% and 12.5% year-on-year respectively, accounting for 28.1% and 30.6% of new retail loans respectively. On the liability side, the company’s deposits increased by 12.8% (vs + 9.4%, 21q3) year-on-year at the end of 2021, of which retail and corporate deposits maintained steady growth, with year-on-year growth of 12.6% and 12.9% respectively. The deposit structure was continuously optimized, and the average daily balance of demand deposits accounted for 64.5%, an increase of 4.5pct year-on-year.
The overall asset quality was stable, and the provision level was further consolidated. The non-performing rate of the company at the end of 2021 was 0.91%, with a year-on-year decrease of 16bp and a month on month decrease of 2bp, and the performance of asset quality improved steadily. In terms of classification, the non-performing rate of retail loans is 0.81%, which is the same as that at the end of 2020. Among them, the non-performing rate of credit card loans is 1bp lower than that at the end of 2020, but 7bp higher than that at 21q2. We think it is mainly affected by the policy of reducing the overdue loans more than 60 days to non-performing loans; Corporate loans improved significantly in the second half of the year, with the year-end non-performing rate of 1.24%, a decrease of 34bp compared with the end of 2020 and 33bp compared with 21q2. We calculated that the company’s Q4 single quarter annualized NPL generation rate was 0.92%, down 1bp month on month, and the pressure margin of asset quality improved. In terms of forward-looking indicators, the concern rate of the company at the end of 2021 was 0.84%, an increase of 3bp compared with the end of the previous year. It was also affected by the adjustment of the recognition time point of overdue credit card loans. On the whole, the asset quality of the company was stable and good. At the end of 2021, the provision coverage rate of the company was 484%, with a significant increase of 41 percentage points month on month, and the provision to loan ratio was 4.42%, with a month on month increase of 29BP. The company further enhanced the provision coverage level, and its risk offset ability was ahead of the industry.
Great wealth management has achieved remarkable results, and multiple measures of openness + digitization have been taken at the same time. In 2021, the company proposed to build a 3.0 model with “big wealth management business model + digital operation model + open and integrated organization model” as the core, and make every effort to build a big wealth management value cycle chain. At present, the advantages of the business model of big wealth management are beginning to show, which are reflected in: 1) the customer base is solid, and the advantages of high net worth customer base are solid. In 2021, the number of retail customers increased by 9.5% year-on-year to 173 million, with the corresponding retail AUM reaching 10.76 trillion yuan, a year-on-year increase of 20.3%, maintaining rapid expansion. Among them, AUM of sunflower and above and private banks increased by 20.3% and 22.3% year-on-year, reaching 8.84 trillion yuan and 3.39 trillion yuan respectively. Among them, the proportion of private AUM in retail AUM increased by 0.5pct year-on-year to 31.5%, reflecting that the company’s advantage in high net worth customer base is still stable. 2) Actively promote the platform and further open integration. In order to serve the diversified needs of customers, the company and its partners built a “big platform”, including launching the “Zhaoyang plan”, building a growth platform for potential fund managers, upgrading the “Zhaocai No.” wealth open platform, and introducing a total of 87 asset management institutions in 2021. 3) Digital operation is becoming more and more perfect, and has obtained the qualification of digital RMB operation organization. The company continues to promote the organic integration of monthly active users (MAU) and AUM. In 2021, there were 111 million Maus of China Merchants Bank Co.Ltd(600036) app and handheld life app. At the same time, the company has obtained the qualification of digital RMB operation organization. At present, there are only 9 designated operation organizations of digital RMB. As the only joint-stock bank that has obtained the qualification, the company is expected to seize the opportunity under the new payment system of digital RMB and further give full play to the advantages of retail sales.
Investment suggestion: excellent profitability, optimistic about the continuation of leading premium. We believe that the competitive advantage of China Merchants Bank in retail business is still stable. The strategic effect of light banking in the past few years is remarkable, and the profitability has always been ahead of the industry, and the forward-looking strategic layout is also the main reason for the valuation premium of the company over the years. The 3.0 business model proposed by the company integrates the financial technology, open integration and light culture mainly explored by China Merchants Bank in the past three years with the business model of building a large wealth management value cycle chain proposed this year, and the advantages of the company’s wealth management business are expected to be continuously strengthened in the future. Taking into account the marginal rise of economic downward pressure and the disturbance of the epidemic, we slightly reduced the company’s profit forecast for 22 and 23 years, and added a new 24-year profit forecast. It is estimated that the company’s EPS in 2022, 2023 and 2024 will be 5.62/6.63/7.64 yuan respectively (the original forecast value of 2022 / 2023 is 5.66/6.69 yuan respectively), and the corresponding profit growth rate will be 18.1% / 18.1% / 15.2% respectively. At present, the corresponding share price of China Merchants Bank in 2022, 2023 and 2024 is 1.4x/1.3x/1.1x respectively. Standing in the long-term dimension, with excellent profitability and asset quality assurance, we continue to be optimistic about the competitive advantage of China Merchants Bank in the field of wealth management and maintain the “strongly recommended” rating.
Risk tips: 1) macroeconomic downturn leads to higher pressure on industry asset quality than expected; 2) The decline of interest rate leads to the narrowing of the industry interest margin, which is higher than expected; 3) The escalation of Sino US friction has led to an increase in external risks.
