Saturday, August 31, 2013

ICBC 2Q13: Steady on all fronts (CIMB)

Current HK$5.06
Target HK$6.38
2Q13: Steady on all fronts

 Steady is the best way to describe ICBCs 2Q13 results. Modest revenue progression and control on expenses and asset quality are likely to remain features of the bank’s growth for the next few quarters. The only remarkable point was a sharp decline in interbank assets. We reiterate ICBC as one of our top picks.

2Q13 net profit of Rmb69.6bn (+12.6% yoy / +1.3% qoq) was 6.8% ahead of our estimate and 5.4% ahead of consensus. The beat was driven by revenues slightly higher and expenses slightly lower than expected. We raise our FY13 EPS by 2.3% (higher revenues). We reiterate our HK$6.38 GGM-derived target price (1.37x PB) and Outperform rating. Catalysts include continued positive surprises on earnings and asset quality.

Solid revenue progression
NII was up a solid 2.3% qoq, driven by 1.9% loan growth. NIM declined more strongly than expected (-7bp qoq to 2.52% vs. 2.56% forecast) but as most of the drivers of the NIM decline are now out of the way, we expect NIM to stabilise at this lower level. Fees fell by 2.9% qoq from an exceptionally strong level in 1Q13. Fair value and trading gains accelerated qoq and provided additional revenue support.

Interbank assets drop
While overall asset growth was modest (+2.0% qoq), interbank assets dropped by 19.0% qoq. This was driven by a decline in reverse repos, especially the ones with securities as collateral (-24% hoh). We expect some of this to reverse in the quarters ahead. In any event ICBC’s total interbank assets amount to only 5.9% of total assets. ICBC’s WMP assets continued to grow steadily, up 20% hoh to Rmb1.2tr.

Stable asset quality
ICBC’s asset quality indicators remain broadly stable. NPLs advanced 1.9% qoq, in line with loan growth, leaving the NPL ratio flat at 87bp. The special mention loan balance fell 5.1% qoq. Coverage remained flat at 288%, while the loan loss reserve to loan ratio remained flat at a healthy 2.50%. Loan impairment charges for the quarter amounted to 41bp, in line with expectations.

Source/Extract/Excerpts/来源/转贴/摘录: CIMB-Research,
Publish date: 29/08/13

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