\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 988 Bank Of China Limited(601988) )
Event:
On April 29, Bank Of China Limited(601988) released the first quarter report of 2022. During the reporting period, the operating revenue was 161118 billion, yoy + 2.1%, and the net profit attributable to the parent company was 57.751 billion, yoy + 7.0%. The weighted average return on net assets is 12.06% (yoy-0.11pct).
Comments:
In the first quarter of 2022, the year-on-year growth rates of Bank Of China Limited(601988) revenue and net profit attributable to parent company were 2.1% and 7.0% respectively, and the growth rates decreased by 5.0 and 5.3pct respectively compared with 2021. Under the condition that the asset quality remained healthy and stable, the pressure of provision provision was mitigated, and the credit impairment loss accrued in 1q was 29.723 billion yuan (yoy-8.2%). In terms of year-on-year growth of split performance, scale expansion is the main contribution. Compared with 2021, the negative drag of interest margin narrowed, non interest income turned from positive contribution to negative, and the positive contribution of provision narrowed slightly.
The scale expansion superimposed on the flexibility of interest margin, driving the net interest income to increase by 5.5% year-on-year to 109.9 billion yuan
1q credit “made a good start” and optimized the asset side structure. In the first quarter of 2022, Bank Of China Limited(601988) interest bearing assets and loans increased by 6.4% and 10.2% year-on-year respectively, and the growth rate decreased by 3.8pct and 0.3pct respectively compared with the end of the previous year; 1q added 794.7 billion yuan of credit, an increase of 34.5 billion yuan year-on-year. By the end of 1q, the proportion of loans in interest bearing assets had increased by 1.43pct to 61.9% quarter on quarter, a high in recent ten years.
The ability to acquire core liabilities was strong, and deposits maintained a good growth trend. In the first quarter of 2022, Bank Of China Limited(601988) interest bearing liabilities and deposits increased by 5.6% and 6.3% year-on-year respectively, and the growth rate decreased by 4.8pct and 1.1pct respectively compared with the end of the previous year. 1q increased deposits by 908.6 billion yuan, a year-on-year decrease of 111.4 billion yuan. By the end of 1q, the proportion of deposits in interest bearing liabilities had increased by 2.12pct to 78.9% quarter on quarter.
The net interest margin remained flat for three consecutive quarters, showing strong resilience. 1q net interest margin was 1.75%, unchanged for the third consecutive quarter, down 3bp from the same period last year, showing strong toughness. It is estimated that the rate of return on interest bearing assets decreased by 5bp to 3.14% compared with 2021, and the cost rate of interest bearing liabilities decreased by 1bp to 1.63% compared with 2021. On the whole, it is expected that the pressure of interest margin narrowing mainly comes from the asset side, and the debt cost control will slow down the pressure of interest margin to a certain extent.
Non interest income decreased by 4.7% year-on-year. Among the non interest income, the net income from handling fees and commissions decreased by 6.8% year-on-year to 25.978 billion yuan. Under the condition of relatively weak capital market in the first quarter, it is expected that the income from selling funds on a commission basis and other businesses will be under pressure. Other non interest net income decreased by 2.4% year-on-year to RMB 25.207 billion, which was mainly affected by factors such as losses from changes in fair value. By the end of 1q, non interest income accounted for 31.8% of the revenue, a decrease of 2.2pct compared with the same period last year, but an increase of 2.0pct compared with the end of the previous year.
The asset quality remained healthy and stable, and the core Tier-1 capital adequacy ratio increased steadily and slightly. At the end of 1q, the non-performing loan ratio was 1.31%, with a quarter on quarter decrease of 2bp; The provision coverage rate was 187.54%, with a slight increase of 0.49pct quarter on quarter.
While improving the endogenous capacity of capital, the company has steadily carried out external capital supplement. At the end of 1q, the core tier 1 capital adequacy ratio / Tier 1 capital adequacy ratio / capital adequacy ratio were 11.33% / 13.30% / 16.64% respectively, with a quarter on quarter change of 0.03pct / -0.02pct/0.11pct 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. In the first quarter of 2022, the credit supply achieved a “good start”, the interest margin showed strong toughness, and the asset quality was stable and good 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. Maintain the EPS forecast of 0.80 yuan / 0.84 yuan / 0.89 yuan in 202224, and maintain 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.
