HSI : 21,705
Price Target : 12-Month HK$ 6.60 (Prev HK$ 6.57)
Well rounded performance
2Q earnings beat estimates
Asset quality better than expected with stabilizing NPL trend
Capital position remains solid
Maintain BUY with revised DDM-TP of HK$6.6
Results lifted by fee income. ICBC’s 2Q earnings grew 13% y-o-y to Rmb69.6bn, 10% above our estimates or 5% higher than a Bloomberg survey. Key positives are higher than expected fee income and lower credit cost. 1H13 net profit accounted for 55%/54% of our or consensus full year forecasts.
Decent asset quality and capital trends. NPL increase during 2Q decelerated compared to 1Q levels, while 2Q NPL ratio was flat. This may have been aided by a write off of Rmb6.5bn in 1H13 (Rmb5bn in 2H12). The bank’s < 90 day overdue loans increased by 22% hoh, which is higher than ABC and CCB, but smaller than the joint stock banks. ICBC still has the lowest NPL ratio among the Big 4 banks. ICBC’s core T1 CAR stood at 10.48% as of Jun’13, which is the second highest among large caps next to CCB. We believe its current payout ratio of 35% is sustainable, and look for dividend yields of 6.5-7.0% in 2013-2014.
Maintain BUY. We have revised up FY13-14F earnings by 2-3% to reflect higher non-interest income growth and lower credit cost given better than expected asset quality trend. DDM-TP is increased to HK$6.6 accordingly, implying 1.5x FY13F P/BV. We continue to like ICBC for its well rounded performance and prudent risk profile. Our only complaint is the stock’s already strong relative performance against peers.
Publish date: 30/08/13