汇丰银行-中国-银行业-中国银行业：金融体系的稳定器-2019.9.2-52页.pdf

Disclosures&Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix,and with the Disclaimer,which forms part of it.Issuer of report:The Hongkong and Shanghai Banking Corporation Limited View HSBC Global Research at:https:/ THIS CONTENT MAY NOT BE DISTRIBUTED TO THE PEOPLES REPUBLIC OF CHINA(THE PRC)(EXCLUDING SPECIAL ADMINISTRATIVE REGIONS OF HONG KONG AND MACAO)1H19 was better than the market was concerned it would be,in our view.We discuss sector trends and key beats/misses Cost efficiency and asset quality improved;as an offset,NIM remained under pressure and deposit growth slowed in 2Q Among our Buy-rated stocks,we see more positives for CCB,CEB and ICBC in the 1H19 results 1H19 results for Chinas banks came in better than the market was concerned they would,in our view.In aggregate,the banks under our coverage delivered attributable profit growth of 6.7%y-o-y in 1H19,accounting for 52-61%of 2019e consensus across all the banks.Attributable book value grew 4.5%h-o-h despite 2018s dividend payout.Among the seven key factors we monitor in results,we identify four positive,one negative,and two mixed trends:1.Net interest income moderately negative.Net interest income rose 1.9%q-o-q in 2Q19,or 2.2%h-o-h.NIM,in aggregate,was down 2bp q-o-q in 2Q19 and down 5bp h-o-h in 1H19.Pressure will likely persist with LPR interest rate reform(China Banks Interest rate reform:bull/bear views and sensitivity,19 August 2019).2.Fee&other income moderately positive.Fee and other income for 1H19 rose 13.6%,attributable to card-related income and product distribution income.Fee and other income represented c.30.3%of total revenue in 1H19.3.Cost efficiency positive.Perhaps overlooked,banks noticeably improved cost efficiency.Revenue in aggregate was up 10.5%y-o-y in 1H19,versus cost growth of 7.4%y-o-y;the cost-income ratio was down 83bp y-o-y,to 28.8%.4.Asset quality moderately positive.NPL ratios in aggregate was down 6bp h-o-h,to 1.45%,at end-2Q19.NPL coverage increased ratio up 11.1ppt,to 214%.Loan loss reserve as%total loans was up 4bp h-o-h,to 3.09%.5.Balance sheet mixed.Loans grew 6.7%h-o-h(faster than asset growth of 5.8%).Deposits grew 7.4%h-o-h.The loan-to-deposit ratio was down 0.5ppt,to 77.2%;that said,most of the deposit growth was achieved in 1Q and momentum slowed noticeably in 2Q19 q-o-q.6.Liquidity coverage ratio mixed.All banks under coverage attained 100%LCR;overall LCR improved in 1Q19 but was reduced in 2Q19.7.Capital ratios were negative.CET1 ratio in aggregate was down 21bp q-o-q and 24bp h-o-h due mostly to the 2018 dividend payout.Meanwhile,Tier 1 ratio was affected less(down 10bp h-o-h)as multiple banks issued AT1 instruments.Implications:We view the 1H19 result as moderately positive.Among our Buy-rated stocks,we see more positives on CCB,CEB and ICBC.2 September 2019 Gary Lam*Head of Greater China Banks Research The Hongkong and Shanghai Banking Corporation Limited .hk+852 2996 6926 Yiwei Liu*Research Associate,China Banks The Hongkong and Shanghai Banking Corporation Limited .hk+852 2996 6635 *Employed by a non-US affiliate of HSBC Securities(USA)Inc,and is not registered/qualified pursuant to FINRA regulations China Banks Equities Commercial Banks China A stabiliser for the financial system Equities Commercial Banks 2 September 2019 2 Key beats and misses Large state-owned banks ICBC beat on operating costs and asset quality.Revenue was up 9.1%y-o-y while cost was up 6.3%y-o-y in 1H19.Cost-income ratio down 0.6ppt y-o-y,to 22.1%,which was ahead of peers.Asset quality trends were solid in both corporate and retail segments,with the NPL ratio down 3bp q-o-q,to 1.48%,NPL coverage up 6.2ppt,to 192.0%,loan loss reserve as%total loans up 3bp q-o-q,to 2.83%,and 90-day overdue loans as%total loans fell h-o-h,to 1.13%.CCB beat on asset quality and operating costs.Asset quality improved,primarily thanks to corporate asset quality improvement.NPL ratio was down 3bp q-o-q in 2Q19,to 1.43%,and NPL coverage ratio was up 3.8ppt q-o-q.As for operating costs,it grew 5.2%y-o-y while revenue rose 6.7%.Cost-income ratio was down 0.3ppt y-o-y,to 22.8%.BOC beat on capital.Tier 1 ratio was up 34bp q-o-q,to 12.85%,thanks to the RMB73bn preference share issuance in June 2019;BOC further issued RMB27bn preference shares in 3Q19 and has plans to issue more AT1 instruments.ABC beat on asset quality.Asset quality improved,with the NPL ratio declining 10bp q-o-q and the NPL coverage ratio increasing 14ppt q-o-q,to 278%.Credit cost declined.As an offset,loan loss reserve as a percentage of total loans fell q-o-q.PSB beat on operating costs.Operating expenses were down 2.1%y-o-y in 1H19 while operating income was up 7.0%y-o-y.Cost-income ratio declined 4.8ppt y-o-y,to 51.7%.PSB surprised the market by reporting an 18.9%y-o-y decline of“general operating and other administrative expenses”,as well as a c.RMB4bn decline in“other”expenses linked to a reversal of“estimated liabilities accrued in previous years”.Joint-stock banks(A/H dual listed)CMB missed on loan and deposit spread.NIM was down only modestly,by 3bp q-o-q,in 2Q19,to 2.69%,which was largely in line with our expectations and remains higher than most peers.However,going into details,loan yield declined 8bp q-o-q and deposit costs increased 4bp q-o-q;the loan-to-deposit spread was compressed by c.12bp q-o-q,implying an unfavourable loan mix adjustment and weakened loan pricing power;the demand deposits mix declined.CITIC beat on cost efficiency and deposit growth.Revenue grew 14.5%y-o-y as fee income rose 29.4%y-o-y in 1H19 on higher fees from bank cards and agency fees;while cost grew 9.4%y-o-y in 1H19;the cost-income ratio declined 1.3ppt y-o-y,to 26.5%.Deposits grew 5.6%q-o-q in 2Q19 after growing 4.7%q-o-q in 1Q19.The strong deposit growth in 1H19 was helped by both corporate deposits(+8.8%h-o-h)and retail deposits(+17.7%h-o-h).CEB beat on revenue.Revenue growth was strong,at 26.6%y-o-y,in 1H19,with net interest income growing 42.6%y-o-y and fee income up 21.7 y-o-y.Non-interest income accounted for 26%of total revenue,driven mostly by cards,wealth management services,and corporate services;the progress reflects the banks focus on enhancing its wealth management franchise,investments in technology,and transaction banking.Joint-stock banks(A-share only)PAB beat on net interest margin.NIM was up 18bp q-o-q(up 8bp asset yield and down 11bp cost of liability);this is against broader sector trends.Asset yield benefited from retail loans while deposit costs were lowered across corporate and retail;PABs management attributed this to the banks deposit franchise,collaboration with Ping An Group,and improved transaction capability.3 Equities Commercial Banks 2 September 2019 INDB beat on deposit mix.Deposit growth was strong in 2Q19,up 5.7%q-o-q,of which demand deposits increased 8.9%q-o-q,faster than time deposits growth of 3.7%q-o-q.Loans grew 5.0%q-o-q.LDR decreased 0.58ppt,to 88.8%.SPDB beat on operating cost efficiency and deposit mix.Costs grew 7.0%y-o-y in 1H19,slower than revenue growth of 19.0%y-o-y.The cost-income ratio declined by 2.6ppt y-o-y,to 22.9%.As for the deposit mix,deposits grew 3.7%q-o-q in 2Q19,with demand deposits up 5.5%q-o-q and time deposits up 2.2%q-o-q.Loans grew 3.0%q-o-q.LDR declined by 0.61ppt q-o-q,to 100.8%.Exhibit 2:China Banks valuation comps Company Stock code Rating Target price Current price*Upside/downside _ PB _ _ PE _ _ ROE _ _ Dividend yield _ 2018a 2019e 2020e 2018a 2019e 2020e 2018a 2019e 2020e 2018a 2019e 2020e China bank H-shares(HKD)ICBC 1398.HK Buy 7.20 4.95 45.5%0.72x 0.65x 0.60 x 5.48x 5.27x 5.01x 13.68%12.98%12.50%5.56%5.78%6.08%CCB 0939.HK Buy 8.80 5.82 51.2%0.70 x 0.64x 0.58x 5.29x 5.06x 4.80 x 13.94%13.17%12.69%5.77%6.03%6.35%BOC 3988.HK Buy 4.70 2.99 57.2%0.53x 0.49x 0.45x 4.63x 4.44x 4.20 x 11.91%11.46%11.20%6.75%7.04%7.44%ABC 1288.HK Buy 4.50 3.02 49.0%0.61x 0.56x 0.51x 4.69x 4.67x 4.33x 13.50%12.49%12.37%6.32%6.58%7.10%PSB 1658.HK Hold 5.10 4.72 8.1%0.82x 0.75x 0.69x 6.98x 6.35x 5.81x 12.33%12.30%12.34%4.50%4.72%5.16%CMB 3968.HK Hold 41.10 35.70 15.1%1.62x 1.44x 1.30 x 10.40 x 9.29x 8.64x 16.57%16.45%15.86%2.89%3.23%4.05%CITIC 0998.HK Buy 5.90 4.10 43.9%0.46x 0.42x 0.39x 4.23x 3.93x 3.73x 11.27%11.10%10.78%6.16%6.63%6.98%CEB 6818.HK Buy 4.40 3.27 34.6%0.54x 0.49x 0.45x 4.86x 4.35x 4.20 x 11.37%11.79%11.23%5.40%6.03%6.25%Average 0.75x 0.68x 0.62x 5.82x 5.42x 5.09x 13.07%12.72%12.37%5.42%5.75%6.18%China bank A-shares(RMB)ICBC 601398.SS Buy 6.20 5.39 15.0%0.86x 0.78x 0.72x 6.55x 6.30 x 5.99x 13.68%12.98%12.50%4.65%4.84%5.09%CCB 601939.SS Buy 7.60 6.90 10.1%0.91x 0.83x 0.76x 6.88x 6.59x 6.25x 13.94%13.17%12.69%4.43%4.63%4.88%BOC 601988.SS Hold 4.10 3.53 16.1%0.69x 0.63x 0.59x 6.00 x 5.76x 5.45x 11.91%11.46%11.20%5.21%5.43%5.74%ABC 601288.SS Hold 3.90 3.40 14.7%0.75x 0.69x 0.63x 5.79x 5.77x 5.35x 13.50%12.49%12.37%5.11%5.32%5.75%CMB 600036.SS Hold 35.50 34.28 3.6%1.71x 1.52x 1.37x 10.96x 9.79x 9.10 x 16.57%16.45%15.86%2.74%3.07%3.85%CITIC 601998.SS Reduce 5.10 5.59-8.8%0.68x 0.63x 0.58x 6.33x 5.89x 5.59x 11.27%11.10%10.78%4.11%4.43%4.67%CEB 601818.SS Hold 3.80 3.76 1.1%0.68x 0.62x 0.57x 6.13x 5.49x 5.30 x 11.37%11.79%11.23%4.28%4.78%4.95%SPDB 600000.SS Hold 10.60 11.28-6.0%0.75x 0.68x 0.62x 6.11x 5.76x 5.48x 12.95%12.37%11.78%3.10%3.29%3.46%INDB 601166.SS Hold 16.50 17.17-3.9%0.81x 0.73x 0.66x 6.03x 5.75x 5.47x 14.23%13.38%12.75%4.02%4.21%4.43%PAB 000001.SZ Reduce 9.90 14.16-30.1%1.10 x 0.99x 0.90 x 10.15x 8.93x 8.20 x 11.34%11.73%11.50%1.02%1.16%1.27%Average 0.89x 0.81x 0.74x 7.09x 6.60 x 6.22x 13.08%12.69%12.27%3.87%4.12%4.41%*Priced at close of 30 August 2019 Source:Company data,Bloomberg,HSBC estimates Exhibit 1:2Q19 and 1H19 results conclusions Group 1 Group 2 Group 3 Group 4 Group 5 Large SOBs Intl SOBs Rural SOBs Balanced banks Corporate-focused JSBs ICBC CCB BOC ABC PSB CMB PAB CITIC CEB SPDB INDB Seven key factors Net interest income Neutral Neutral Mixed Moderately negative Mixed Mixed Positive Neutral Key Positive Moderately positive Mixed Fee&other income Mixed Moderately positive Positive Moderately positive Positive Positive Moderately negative Positive Positive Mixed Positive Cost efficiency Positive Positive Neutral Neutral Significant positive Negative Moderately positive Positive Key Positive Positive Positive Asset quality Positive Key positive Mixed Positive Positive Moderately positive Mixed Moderately negative Neutral Mixed Negative Balance sheet Mixed Mixed Mixed Moderately negative Moderately negative Moderately positive Positive Positive Key Positive Positive Positive Liquidity Positive Neutral Moderately negative Negative Moderately negative Neutral Negative Positive Moderately positive Negative Neutral Capital ratios Moderately negative Moderately negative Positive Moderately negative Negative Moderately negative Mixed Moderately negative Moderately negative Moderately negative Mixed Conclusion 1H19 review Moderately positive Positive Neutral Mixed Moderately positive Mixed Positive Moderately positive Positive Moderately positive Moderately positive Source:HSBC Research Equities Commercial Banks 2 September 2019 4 Exhibit 3:1H19 Results Aggregate performance of China Banks under coverage 1Q19 2Q19 q-o-q y-o-y 1H18 2H18 1H19 h-o-h y-o-y P&L summary (RMBm,q-o-q,h-o-h,and y-o-y%change)Net interest income 770,367 784,903 1.9 8.4 1,425,216 1,521,201 1,555,270 2.2 9.1 Net fees&commissions 250,975 220,066-12.3 9.2 421,005 378,288 471,041 24.5 11.9 Other non-interest income 121,488 83,258-31.5-4.6 173,700 137,152 204,746 49.3 17.9 Operating income 1,142,830 1,088,227-4.8 7.4 2,019,921 2,036,641 2,231,057 9.5 10.5 Operating expense-324,045-317,707-2.0 5.7-597,757-734,766-641,752-12.7 7.4 PPOP 818,785 770,520-5.9 8.1 1,422,164 1,301,875 1,589,305 22.1 11.8 Impairment -303,260-240,357-20.7 6.7-442,815-560,820-543,617-3.1 22.8 Operating profit 515,525 530,163 2.8 8.8 979,349 741,055 1,045,688 41.1 6.8 Associates 1,662 1,591-4.3 0.2 3,139 3,360 3,253-3.2 3.6 Profit before tax 517,187 531,754 2.8 8.8 982,488 744,415 1,048,941 40.9 6.8 Taxation-91,292-92,797 1.6 16.2-174,166-124,542-184,089 47.8 5.7 Minority and preferences-13,062-12,825-1.8 10.8-21,904-29,244-25,887-11.5 18.2 Attributable profit 412,833 426,132 3.2 7.2 786,418 590,629 838,965 42.0 6.7 Balance sheet items(RMBbn,q-o-q,h-o-h,and y-o-y%change)Total assets 159,172 162,389 2.0 5.8 149,684 153,431 162,389 5.8 8.5 Customer loans 86,968 89,310 2.7 6.7 80,475 83,698 89,310 6.7 11.0 Customer deposits 113,765 115,662 1.7 7.4 104,974 107,718 115,662 7.4 10.2 Attributable equity 11,446 11,516 0.6 4.5 10,315 11,021 11,516 4.5 11.6 Ratios (%,q-o-q,h-o-h,and y-o-y ppt change)Net interest margin 2.18 2.16-0.02-0.01 2.09 2.18 2.12-0.05 0.04 Loan/deposit ratio 76.4 77.2 0.77 0.56 76.7 77.7 77.2-0.49 0.56 Cost/income ratio 28.4 29.2 0.84-0.48 29.6 36.1 28.8-7.31-0.83 NPL ratio 1.49 1.45-0.04-0.09 1.53 1.51 1.45-0.06-0.09 90d overdue ratio 0.04 1.11 1.07-0.13 1.24 1.15 1.11-0.04-0.13 NPL Coverage ratio 209.9 213.8 3.94 19.55 194.3 202.7 213.8 11.16 19.55 Credit costs na na na na 1.08 1.26 1.19-0.06 0.11 Credit costs on assets 0.78 0.60-0.18-0.01 0.60 0.74 0.69-0.05 0.09 Loan loss reserve 3.12 3.09-0.03 0.12 2.98 3.05 3.09 0.04 0.12 Core Tier-1 ratio 11.39 11.18-0.21 0.24 10.94 11.42 11.18-0.24 0.24 Tier-1 ratio 12.08 12.00-0.08 0.37 11.63 12.10 12.00-0.10 0.37 CAR 14.75 14.75 0.00 0.84 13.91 14.70 14.75 0.05 0.84 RWA to total assets 62.40 62.44 0.04 0.19 62.25 62.17 62.44 0.26 0.19 Liquidity coverage ratio 140.81 133.40-7.41 10.09 120.18 128.62 135.76 7.15 15.59 ROAE 14.74 14.89 0.15-0.71 15.67 11.16 15.01 3.85-0.66 ROAA 1.06 1.06 0.00-0.01 1.08 0.79 1.07 0.29-0.01 Effective tax rate 22.1 21.8 -0.34 1.70 22.1 21.1 21.9 0.86-0.20 Source:Company data,HSBC estimate 5 Equities Commercial Banks 2 September 2019 Exhibit 4:China Banks 1H19 results(half-yearly comparison)Half-yearly comparison ICBC CCB BOC ABC PSB CMB CITIC MSB CEB SPDB INDB PAB 2H18 1H19 2H18 1H19 2H18 1H19 2H18 1H19 2H18 1H19 2H18 1H19 2H18 1H19 2H18 1H19 2H18 1H19 2H18 1H19 2H18 1H19 2H18 1H19 P&L summary(RMBm)Net interest income 294,902 299,301 246,792 250,436 187,255 181,684 243,927 237,632 122,460 119,082 83,372 87,407 54,964 57,162 42,806 45,523 26,559 49,183 60,547 64,264 50,058 49,895 37,309 43,639 Net fees&commissions 66,041 88,501 54,031 76,695 39,020 50,564 34,504 50,899 6,752 9,339 29,011 38,971 23,286 28,292 23,804 27,282 26,416 12,749 19,149 22,690 22,861 23,546 13,358 18,391 Other non-interest income 2,876 6,401 10,220 17,256 26,049 44,440 16,176 35,936-375 13,283 9,491 11,252 6,136 7,738 13,264 14,278 5,108 4,292 9,785 10,645 11,983 16,466 8,808 5,799 Operating income 363,819 394,203 311,043 344,387 252,324 276,688 294,607 324,467 128,837 141,704 121,874 137,630 84,386 93,192 79,874 87,083 58,083 66,224 89,481 97,599 84,902 89,907 59,475 67,829 Operating expense-112,245-87,154-100,083-78,549-94,847-91,130-114,002-105,153-77,554-73,222-