Industrial Bank (601166) Interim Review: Vigorously Consolidating Asset Quality and Keeping Core Profitability Strong
Event: Industrial Bank disclosed in its 2019 Interim Report that 1H19 achieved operating income of US $ 89.9 billion, a year-on-year increase of 22.
5%; net profit attributable to mothers reached 3.59 million yuan, an increase of 6 year-on-year.
6%, operating income in line with expectations, the performance growth rate was lower than our expectations, the non-performing ratio in the second quarter of 19 decreased quarter-on-quarter from 1bp to 1.
Industrial Bank proactively raised the standards for bad identification and vigorously made provisions for non-standard provisions, so that the quality of assets was more solid.
In the second quarter of 19, Industrial Bank’s NPL ratio decreased by 1bp to 1 quarter-on-quarter.
56%. In the second quarter of 19, the write-off of bad write-off rates increased by 70bps to 168bps quarter-on-quarter.
In our judgment, the increase in non-performing generation rate in the second quarter was due to the potential for serious misunderstandings. It was due to a one-off confirmation of non-performing increase in write-offs. The scale of loan write-offs and transfers in 1H19 Industrial Bank was 19.1 billion (18.9 billion).
According to the management at the performance meeting, as of 2Q19, Industrial Bank’s overdue loans / non-performing substitutions of over 60 days reached 93%.
Under the situation that the bad recognition standards are becoming severe, the Industrial Bank’s bad forward-looking indicators have further improved, and there will be little negative pressure in the future.
As of 2Q19, Industrial Bank paid attention to the loan rate, and the overdue loan rate decreased by 16bps and 2bps to 1 respectively from the initial period.
88% and 2.
Specifically, Industrial Bank has increased the provision for non-standard assets, and it is expected that the provision coverage will be more adequate.
In the second quarter of 19th, Industrial Bank’s provision coverage ratio decreased by 13 quarter-to-quarter quarterly to 193.
5%, which is still at a relatively high level of listed banks. According to estimates, the loan-to-loan ratio of non-standard assets is 2.
4%, which is an increase of 62 basis points compared with the end of 2018. In fact, the indicator should only be higher based on credit non-standard assets.
The loan-to-loan ratio of about 0% is basically the same.
We believe that Industrial Bank’s provision coverage will be more comprehensive and comprehensive to improve the long-term criticism of the market for its non-standard assets, and should respond to its confidence in asset quality conversion.
Industrial Bank’s operating income, PPOP maintained a growth rate of more than 20%, and the “tight assets-loose debt” pattern helped the net interest margin continue to widen.
In 1H19, the annual growth rate of Industrial Bank’s operating income and PPOP were 22 respectively.
5% and 25.
3%, core profitability remains strong and is expected to be at the forefront among listed banks.
In 1H19, Industrial Bank’s net interest margin (disclosed value) previously increased significantly by 22bps to 2.
00%, driving a 9% increase in net interest income each year.
According to the analysis of the change in the net interest margin from the previous quarter, the core motivation for the continued rise of the Industrial Bank’s net interest margin in 1H19 still came from the decline in the cost of interbank resistance, and the cost of interbank resistance in 1H19 decreased by 51bps to 3 from 2H18.
60%, interbank debt interest rate factor contributed 14bps to the improvement of net interest margin.
This confirms our Air Force’s view once again that banks with a higher proportion of market-oriented debt will benefit more from this year’s “asset tight-refuse to loose” market environment.
In line with the industry trend, 1H19 Industrial Bank started a downward trend in the cost of corporate time deposits, which fell 1bp to 3 from 2H18.
31%, since 73% of the daily average deposits of Industrial Bank come from the corporate bond, the contribution of the interest rate on debt-side deposits in the second half of the year will help narrow.
On the asset side, Industrial Bank further increased the proportion of loans and continued to optimize the asset structure.
The proportion of Industrial Bank loans to total assets in the second quarter of 19 continued to rise to 46 quarter-on-quarter.
In the first half of the year, 47% of the increase in loans came from general corporate loans and 45% came from retail loans. Optimizing the loan structure helped its 1H19 loan yield continue to increase 3bps to 4 from the previous quarter.
The performance of the middle income group is still dazzling, and bank 杭州桑拿 card and agency fee income have increased significantly each year.
1H19 Industrial Bank’s net fee income increased by 17% year-on-year, of which bank card and agency business fee expenses increased by 46% and 39%, respectively, and the retail wealth business capacity has improved. In the first half of the year, it increased in commission sales funds, insurance, trusts and other productsFaster.
The strategy of “commercial bank + investment bank” continued to be carried out steadily. In the first half of the year, Industrial Bank’s non-financial corporate debt financing instruments underwritten 241.2 billion yuan, an increase of 16%, and green debt underwriting was 4.2 billion, ranking first in the market. Investment suggestion: Industrial Bank continued to vigorously consolidate asset quality, raise bad recognition standards, 四川耍耍网 maintain revenue and PPOP growth rates of more than 20%, and have strong core profitability.
Subsequent gradually to benefit from the “asset tight-deny loose” pattern, supporting its wide net interest margin in the second half of 19 years.
With a long-term strategic budget, Industrial Bank’s diversified development model of financing corporate entities with investment banking is conducive to reducing capital occupation, driving the growth of non-interest income, and driving ROE to continue to rise, which is expected to outperform peers on the public light capitalization track.
We expect net profit attributable to mothers to increase by 12 in 19-21.
3% (maintain profit forecast).
Currently corresponds to 19 years 0.
77 times PB, target evaluation 1.
Twice the 19-year PB, corresponding to 55% of the upside, maintain the Buy rating and renew the bank’s first portfolio.
Risk Warning: The severe economic downturn has caused bad risks for the industry.