\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 988 Bank Of China Limited(601988) )
Event:
On March 29, Bank Of China Limited(601988) released the annual report for 2021. In 2021, the operating revenue was 605559 billion, yoy + 7.1%, and the net profit attributable to the parent company was 216559 billion, yoy + 12.3%. The weighted average return on net assets is 11.28% (YoY + 0.67pct).
Comments:
Both revenue and profit growth continued the trend of quarter on quarter improvement. In 2021, the year-on-year growth rates of Bank Of China Limited(601988) revenue, profit before provision and net profit attributable to parent company were 7.1%, 4.2% and 12.3% respectively, and the growth rates were 0.8, 0.3 and 0.1pct higher than 3q21 respectively. Since the second half of 2021, the growth rate of revenue and profit has increased quarter by quarter. Under the condition that the asset quality remained healthy and stable, the pressure of provision provision was eased, with an annual provision of 104220 billion yuan (yoy-12.4%). In terms of year-on-year growth of split performance, the positive contribution of scale expansion and non interest income was further strengthened quarter on quarter, the negative drag of interest margin was expanded, and the positive contribution of provision was narrowed slightly.
Bank Of China Limited(601988) in recent years, we have continuously promoted the layout of “one body and two wings”, focused on the development of “eight major finance” such as science and technology finance, green finance, inclusive finance, cross-border finance, consumer finance, wealth finance, supply chain finance and county finance, actively served new business forms and models, and cultivated new driving forces for development. Among them, the revenue of wealth finance business increased by 33% year-on-year in 2021, creating an open product shelf of “whole group + whole market” and enhancing the diversity of customer asset allocation; At the end of the year, AUM of the group’s individual customers exceeded 11 trillion yuan, the number of medium and high-end customers and the growth rate of financial assets were the highest in recent three years, and the number of private bank customers reached 147300.
The growth rate of asset scale increased steadily, the net interest margin was flat quarter on quarter, and the net interest income increased by 2.2% year-on-year.
1) the growth rate of interest bearing assets increased by 3.6pct quarter on quarter, and the proportion of credit was roughly the same as that at the beginning of the year. At the end of 2021, Bank Of China Limited(601988) total assets / interest bearing assets / loans increased by 9.5%, 10.2% and 10.5% year-on-year respectively, and the growth rate increased by 3.3pct, 3.6pct and 1.9pct respectively compared with 3q21; The proportion of loans in interest bearing assets decreased by 0.46pct to 60.5% quarter on quarter, roughly the same as that at the end of 2020. At the same time, the investment of medium – and long-term loans was strengthened, and the average balance of medium – and long-term loans in mainland RMB loans increased by 1.31 PCT year-on-year.
2) the deposit growth picked up quarter on quarter, and the deposit cost rate fell to 1.52%. At the end of 2021, Bank Of China Limited(601988) total liabilities / interest bearing liabilities / deposits increased by 9.6%, 10.4% and 7.3% year-on-year respectively, and the growth rate increased by 3.6pct, 4.0pct and 4.3pct respectively compared with 3q21. The proportion of deposits in interest bearing liabilities decreased by 0.48pct to 76.7% quarter on quarter Bank Of China Limited(601988) adhere to the dual advantages of deposit volume and price, and effectively control high-cost liability businesses such as certificates of deposit, structured deposits and agreement deposits while actively expanding deposit acquisition scenarios and continuously improving capital precipitation capacity. In 2021, the deposit cost ratio decreased 6BP to 1.52% compared with the previous year.
3) the net interest margin recorded 1.75%, unchanged quarter on quarter. The net interest margin in 2021 was 1.75%, unchanged quarter on quarter, down 10bp from the previous year. The decline of loan yield was the main drag factor on the net interest margin. Specifically, the rate of return on interest bearing assets was 3.25%, a decrease of 13bp compared with 2020; Among them, the loan yield was 3.83%, a decrease of 13bp compared with 2020; Under the pressure of asset side yield, Bank Of China Limited(601988) strengthened the control of debt cost, and the cost ratio of interest bearing debt decreased by 3bp to 1.63% compared with 2020. The pressure drop of debt cost has a certain release on the pressure of interest margin.
Non interest income increased by 20.6% year-on-year to 180417 billion yuan. Among them, the net income from handling fees and commissions increased by 7.8% year-on-year to 81.426 billion yuan, which was mainly boosted by the growth of business income such as consignment funds and custody. Other non interest net income increased by 33.6% year-on-year to 98.991 billion yuan, mainly due to the year-on-year increase in fair value change income and investment income under the influence of market price changes and other factors.
The asset quality remained healthy and stable, and the capital adequacy ratio increased steadily quarter on quarter. At the end of 2021, the non-performing loan ratio was 1.33%, with a quarter on quarter increase of 4bp and a decrease of 13bp compared with the beginning of the year; The (concern + non-performing) loan ratio was 2.68%, down 65bp from the end of the previous year. At the end of 2021, the provision coverage ratio was 187.05%, with a quarter on quarter decrease of 5.4pct, an increase of 9.21pct over the end of the previous year; The loan allocation ratio was 2.83%, with a quarter on quarter increase of 0.35pct.
While improving the endogenous capacity of capital, the company steadily carried out external capital supplement, and successfully issued 70 billion yuan of perpetual bonds in 2021; At the same time, we strengthened the management of stock capital instruments and redeemed 28 billion yuan of domestic preferred shares. At the end of 2021, the core Tier-1 capital adequacy ratio / Tier-1 capital adequacy ratio / capital adequacy ratio were 11.30% / 13.32% / 16.53% respectively, with a quarter on quarter increase of 0.18pct/0.29pct/0.53pct respectively.
Earnings forecast, valuation and rating Bank Of China Limited(601988) in recent years, we have continuously promoted the layout of “one body and two wings”, fully integrated into the process of economic transformation, focused on the development of “eight major finance”, actively served new business forms and models, and cultivated new driving forces for development Bank Of China Limited(601988) has unique advantages in international operation. With the acceleration of the Federal Reserve’s interest rate increase, the contribution of net interest income of overseas assets is expected to increase. In combination with the operation in 2021, the EPS forecast for 202223 was raised to 0.80 yuan (compared with the last time + 5.3%) / 0.84 yuan (compared with the last time + 5.0%), and the EPS forecast for 2024 was increased to 0.89 yuan, maintaining the “overweight” rating.
Risk warning: if the macroeconomic growth pressure exceeds the expectation, it may affect the company’s credit extension ability; Since 2022, the overseas economic environment has become increasingly complex, which may cause strong disturbance to the situation of BOC’s overseas assets.
