\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 036 China Merchants Bank Co.Ltd(600036) )
Event: China Merchants Bank Co.Ltd(600036) announced 1q22 financial report: net profit of 36.02 billion yuan, yoy + 12.5%; Revenue 91.99 billion yuan, yoy + 8.5%; Annual roe19 24%, year-on-year – 30bp. At the end of March 22, the total assets were 9.4 trillion yuan, the non-performing rate was 0.94%, the provision coverage was 462.7%, and the core Tier-1 capital adequacy ratio was 12.7%.
Comments:
The Q1 financial performance of the company is basically in line with expectations. The profit growth rate slowed down compared with the previous year. In terms of dismantling, the decline in the growth rate of non interest income (- 1.4%) is the main negative factor weakening profitability; The main positive factors are scale expansion (+ 10.4%) and steady provision (+ 1.8%). On the whole, the growth momentum of the revenue side is weak, especially the middle income growth has not continued the level of last year, which is the main reason for the slowdown of profit growth.
It is noteworthy that:
(1) the scale expansion has slowed down compared with the same period last year. Loans increased by 3.4% over the beginning of the year, of which retail loans increased by only 1.3% over the beginning of the year, mainly due to the weak credit demand of residents under the repeated impact of the epidemic. With the marginal easing of consumption stimulus, purchase and loan restrictions and other real estate related policies and the dissipation of the impact of the epidemic, the growth trend of retail credit is expected to be repaired. In the first quarter, the demand for corporate credit was better than that of residents, and the corporate loan increased by 4.0% over the beginning of the year.
(2) the debt cost is extremely optimized and the interest margin is outstanding. The net interest margin of the company increased at a high level in the first quarter, increasing 3bp to 2.51% compared with the whole year of the previous year. Under the influence of the downward trend of market interest rate, the interest margin rose against the trend and exceeded expectations, mainly due to the company’s optimal control of debt cost, and Q1 company’s deposit attraction for time deposits increased significantly. At the end of the first quarter, time deposits increased by 13.7% over the beginning of the year. The average daily balance of Q1 deposits accounted for 81% of interest bearing liabilities, up 4pct from last year. The proportion of deposits further increased, resulting in the cost ratio of interest bearing liabilities in Q1 of 1.58%, down 1bp from the very low level of the previous year. We believe that CMB has been deeply engaged in retail customers and public war customers for many years. The customer base is solid, and the debt cost advantage better than that of the same industry is expected to be maintained.
(3) the year-on-year growth rate of non interest income fell to 6.5%. Q1 non interest income accounted for 40.8% of revenue. As the big head of non interest, the net fee income increased by only 5.6% year-on-year, and the growth rate fell sharply, mainly affected by the downturn of the capital market. The company’s wealth management fee income in the first quarter decreased by 11.1% year-on-year.
(4) the risk exposure is sufficient and the provision for assets is stable. At the end of the first quarter, the non-performing rate, concerned loan rate and overdue loan rate of China Merchants Bank increased by 3, 12 and 6 bp respectively compared with the end of the previous year, which was mainly affected by the rising risk of real estate customers and the impact of the epidemic situation in some areas on the retail loan business. Considering the prudence of the company’s recognition of non-performing assets, it is expected that the risk exposure in the real estate field has been relatively sufficient, and the asset quality is expected to remain stable despite the industry pressure. In the first quarter, the company’s asset provision was moderate, the provision coverage decreased slightly, but it was still at a high level, and the risk offset was sufficient.
Investment suggestion: under the influence of the downward pressure of the economy, repeated epidemics and increased fluctuations in the capital market, the growth rate of the company’s revenue and profit in the first quarter decreased steadily and slightly, which was in line with expectations as a whole. Considering that the company has a solid customer base and a stable debt cost advantage, it is expected to support the company’s high net interest margin; The layout of big wealth management business is relatively in-depth, and the growth rate of non interest income is expected to rise with the recovery of the capital market, so as to support the growth rate of revenue. In addition, the real estate related risks are fully exposed, and the asset quality is expected to remain stable. We expect that the net profit attributable to ordinary shareholders in 2022 / 2023 will increase by 14.8% / 16.1% year-on-year, corresponding to BVPs of 34.44/40.75 yuan / share respectively.
In the short term, management changes affect market confidence and disturb the company’s valuation. In the long run, the company has been deeply engaged in retail business for more than ten years, and has formed a strong customer base and a stable and efficient organizational structure. We expect China Merchants Bank Co.Ltd(600036) “3.0 model” will move forward steadily, driving the continuous high growth of customer AUM and related medium income. We continue to be optimistic about the leading business model, operation model and organization model of China Merchants Bank. The great wealth management value cycle chain is expected to continue to exert its strength and consolidate the company’s market competitiveness. Give 1.6 times of 2022 Pb, corresponding to the target price of 55.1 yuan / share, and maintain the “strongly recommended” rating.
Risk tip: the repeated epidemic situation and the downward economic stall lead to the serious deterioration of asset quality; Unexpected changes in real estate related policies.
