\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 166 Industrial Bank Co.Ltd(601166) )
Core view
On March 24, Industrial Bank Co.Ltd(601166) released the 2021 annual report. In 2021, Industrial Bank Co.Ltd(601166) achieved an operating revenue of 221236 billion yuan, with a year-on-year increase of 8.91%; The net profit attributable to the parent company was 82.68 billion yuan, a year-on-year increase of 24.10%. The annual net interest margin is 2.29%; Net non interest income accounted for 34.15% of revenue, up 4.8pct year-on-year.
Performance perspective: high growth of non interest income and provision feeding profits. In 2021, Industrial Bank Co.Ltd(601166) achieved an operating revenue of 221236 billion yuan, with a year-on-year increase of 8.91%, of which the growth rate of net interest income decreased by 15.85pct compared with 2020, which was the main drag on the growth rate of revenue; The proportion of net income from handling fees and commissions in revenue increased by 0.73pct to 19.29%; Other non interest income increased by 50.04% year-on-year. In 2021, Q4’s revenue in a single quarter was 57.189 billion yuan, with a year-on-year increase of 11.36%. Driven by the recovery of interest margin, the net interest income in a single quarter increased by 3.45% year-on-year, and the growth rate increased by 12.66pct month-on-month compared with Q3 (- 9.21%), which boosted the growth rate of Q4’s revenue. In 2021, the net profit attributable to Industrial Bank Co.Ltd(601166) parent company was 82.68 billion yuan, with a year-on-year increase of 24.10%. Based on the analysis of the driving factors of the net profit, the high growth of other non interest income and the slowdown of provision provision are the main driving forces of the net profit.
Dragged down by the decline of asset side yield, the net interest margin continued to narrow in 2021, and the net interest margin rose against the trend in Q4 of 2021. The Industrial Bank Co.Ltd(601166) net interest margin in 2021 was 2.29%, with a year-on-year decrease of 7bp and a month on month decrease of 3bp compared with the first half of 2021, which was mainly due to the fact that the decline of asset side yield was greater than that of liability side cost rate. From the asset side, the real economy guided by the state, weak financing demand and Industrial Bank Co.Ltd(601166) early layout of emerging strategic industries have positively affected high-quality customers. The yield of interest bearing assets decreased by 3bp to 4.36% month on month compared with the first half of 2021, of which the yield of loans was 5.03%, decreased by 8bp month on month, the yield of interbank assets was 2.42% and increased by 16bp month on month. From the liability side, Industrial Bank Co.Ltd(601166) continued to promote the construction of “settlement bank” and precipitated settlement deposits, driving demand deposits to increase by 9.56% year-on-year, accounting for 41.04% of deposits, an increase of 1.10pct year-on-year, and the average cost rate of deposits was 2.22%, down 4bp year-on-year and a slight increase of 1bp month on month in the first half of the year. At the same time, through reasonable manipulation of interbank fund absorption, the average cost rate of interbank funds remained at a low level of 2.18%, down 3bp month on month in the first half of the year, It provides strong support for stabilizing the interest rate spread. In addition, from the perspective of splitting a single quarter, the net interest margin (measured value, opening and closing caliber) of Q4 in a single quarter was 1.88%, up 14bp month on month compared with Q3, which played a supporting role in Q4’s net interest income and was the main factor for the recovery of Q4’s net interest income in a single quarter.
The system of “big wealth + big asset management + big investment bank” is becoming more and more perfect, and the income of intermediate business is blooming at many points Industrial Bank Co.Ltd(601166) strive to open up the value chain of “asset construction – Product Creation – product sales”. With the combination of wealth bank and investment bank, the transformation of “light capital, light assets and high efficiency” has achieved remarkable results, and the income of intermediate business has blossomed in many places. In 2021, the handling fee income of bank card business / agency business / consulting business was 13.182 billion yuan / 7.153 billion yuan / 14.668 billion yuan respectively, with a year-on-year increase of 12.88% / 44.56% / 9.72% respectively. Relying on the diversified and open “investment ecosystem”, the business of wealth banking has increased rapidly. By the end of 2021, the scale of Industrial Bank Co.Ltd(601166) retail AUM reached 2.85 trillion yuan, a year-on-year increase of 9.01%, and the income of wealth bank reached 23.394 billion yuan, a year-on-year increase of 13.17%. Strengthen the strategy of “commercial bank + investment bank” and make investment banks achieve better results. At the end of 2021, the financing balance of corporate customers (FPA) reached 7.01 trillion yuan, a year-on-year increase of 15.49%, of which the balance of non-traditional off balance sheet financing was 2.71 trillion yuan, a year-on-year increase of 33.21%, continuing the trend that the increment / growth rate of off balance sheet non-traditional corporate financing exceeded that of on balance sheet corporate financing. In 2021 Industrial Bank Co.Ltd(601166) achieved a year-on-year increase of 12.61%, 7.30% and 233.78% respectively in investment banking business income, ficc business income and market making transaction income.
The growth rate of total loan expansion slowed down, and green finance bravely took the lead. At the end of 2021, the Industrial Bank Co.Ltd(601166) total loan balance was 4.43 trillion yuan, with a year-on-year increase of 11.66%, and the growth rate of loan expansion slowed down. However, the credit investment structure has been optimized, and the growth rate of green loans, inclusive small and micro loans and medium and long-term manufacturing loans with strong policy preference has exceeded 40%. As the first green financial bank in China, it reached 1.66 million customers in 2023; The balance of green finance financing was 1.39 trillion yuan, a year-on-year increase of 19.98%, of which the balance of green loans reached 453.94 billion yuan, a year-on-year increase of 42.11%. It is expected that under the goal of “double carbon” transformation, relevant favorable policies in the field of green economy will continue to increase. Industrial Bank Co.Ltd(601166) has a first mover advantage in green finance and is expected to enjoy the dividend of green financial market expansion to the greatest extent.
The amount and rate of non-performing loans decreased, and the quality of assets continued to improve. By the end of 2021, the balance of non-performing loans was 48.714 billion yuan, a year-on-year decrease of 942 million yuan; The non-performing loan ratio was 1.10%, with a sharp year-on-year decrease of 15bp and a month on month decrease of 2bp at the end of the third quarter. The stock of non-performing loans continued to drop and the marginal quality of assets improved. At the same time, the attention rate increased by 15bp to 1.52% year-on-year, mainly due to the strict recognition standards for overdue credit card loans under the regulatory requirements; At the end of 2021, the generalized non-performing rate (non-performing rate + concern rate) was 2.62%, which was the same as that at the end of 2020.
The provision coverage rate continues to rise, and there is no pressure on capital replenishment. At the end of 2021, the Industrial Bank Co.Ltd(601166) provision coverage rate was 268.73%, up 49.90pct year-on-year and 5.67pct month on month compared with the end of the third quarter. The risk resistance ability was continuously enhanced and the profit release space in the future was thickened. In 2021, the pre provision profit (PPOP) was 162320 billion yuan, a year-on-year increase of 6.74%, 17.62 percentage points lower than the pre tax profit growth of 24.37%, and the stage of provision back feeding profit was started. It is expected that Industrial Bank Co.Ltd(601166) profits will still have sufficient room to release under the expectation that the asset quality will continue to improve in the future. Under the light capital transformation, all capital adequacy ratios of Industrial Bank Co.Ltd(601166) increased month on month. By the end of 2021, the Industrial Bank Co.Ltd(601166) core tier 1 capital adequacy ratio, tier 1 capital adequacy ratio and capital adequacy ratio increased by 0.27pct, 0.26pct and 1.47pct respectively month on month compared with the end of the third quarter. There is no pressure on capital replenishment.
Investment advice
Industrial Bank Co.Ltd(601166) relying on the advanced corporate strategy and polishing the three business cards of wealth bank, investment bank and green bank, the performance growth momentum is strong, the asset quality margin is improved, and the provision coverage continues to improve. We use the three-stage DDM model for valuation. Under the absolute valuation, we raise the predicted value of the stock price to 33.51 yuan, corresponding to 1.06 times Pb; Under the relative valuation method, we will give Industrial Bank Co.Ltd(601166) 11 times Pb in 2022, and the corresponding share price range will be raised to 31.68 ~ 34.85 yuan. Maintain Industrial Bank Co.Ltd(601166) “recommended” rating.
Risk tips
Macroeconomic growth is down; Rising real estate risks; The implementation of green policies is less than expected.
