Industrial Bank (601166): Strong revenue and solid asset quality are leaders on the track of referendum banking
In the context of the gradual marketization of interest rates for deposits and loans, for a market-oriented asset such as Industrial Bank, which has a higher proportion of liabilities, it has a smaller impact and a strong revenue growth.
In 1H19, the annual growth rate of Industrial Bank’s operating income and PPOP were 22 respectively.
5% and 25.
3%, ranked second and third among listed stock banks respectively.
Compared to the “asset tightening-loose debt” pattern, the net interest margin continued to widen, and the 1H19 Industrial Bank’s net interest margin (significant increase) increased by a maximum of 22bps to 2.
00%, the decline in the cost of interbank debt is the core driving force for its interest rate rise. It is expected that market liquidity will remain reasonable and sufficient in the future, and financial market interest rates will continue to remain low.
In the meantime, the performance of China Revenue remained dazzling. In addition to bank card fees, Industrial Bank co-operated with non-bank institutions through its strong financial market integration capabilities, which helped boost the agency service fees.
1H19 Industrial Bank’s net fee income increased by 17% annually, of which bank card and agency business fees increased by 46% and 39% annually.
We expect Industrial Bank to have a market-oriented asset-debt structure and excellent middle-income strength. In the ten years of 2019 revenue, PPOP growth will remain double-digit.
Industrial Bank’s bad confirmation is stricter and more accurate, and provisions are more comprehensive and prudent. The change in bad generation caused by raising the recognition standard is a short-term effect. Excessive concerns about the quality of market transaction assets need to be corrected.
At least, 2Q19 Industrial Bank further raised the NPL standard and replaced all non-performing loans with loans overdue for more than 60 days. This resulted in an improvement in the write-off of NPLs in 2Q19 and the consolidation of the bottom of asset quality, leading to confidence in future NPL issues.
At the same time, despite the slight decrease in the provision coverage ratio of Industrial Bank in the second quarter of 19, under IFRS 9 accounting standards, its provision for non-standard provisions was even larger. According to estimates, the ratio of non-standard assets to loans was 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.
In terms of overall indicators, Industrial Bank’s asset quality still maintained an excellent level, second only to China Merchants Bank, 2Q19 non-performing rate, attention rate, overdue rate, provision coverage ratio is still at the second level of the stock bank, and absolute asset asset quality ranks first.
Maintain long-term strategy, “Commercial Bank + Investment Bank” track leader.
The strategy of “Commercial Bank + Investment Bank” continued to be carried out steadily. In the first half of the year, Industrial Bank’s green debt underwriting was US $ 4.2 billion, ranking first in the market; asset turnover was US $ 112.1 billion, an increase of 147%; and the scale of NAFMII bond underwriting since 2019 is 334.9 billionThe market is second with market share 7.
We believe that Industrial Bank’s own financial endowment of financial market business, de-lined and decomposed institutional mechanisms and a “multi-license, cross-market, integrated” operating system have only a certain competitive advantage on the referendum-based track.In the future, it is committed to serving public customers through a light capitalization model, thereby increasing the proportion of middle income, increasing ROE, and outperforming its peers.
On September 4, 2019, Industrial Bank announced the retirement of Chairman Gao Jianping, and Mr. Tao Yiping was temporarily responsible for overall work during the chairman’s vacancy.
President Tao had a deep understanding and comprehensive grasp of Industrial Bank ‘s strategy. Therefore, personnel changes have no practical impact on the strategic strength and implementation of Industrial Bank. Its “commercial bank + investment bank” business model is still its most distinctive market label.
Company view: Industrial Bank’s fundamental turning point is consolidated, asset quality is more reliable, and revenue growth remains strong.
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.
74 times PB, the average discount of the older sector is estimated to be 11%, and even the estimated level does not match the fundamentals of the overlapping industries. Maintain the BUY rating and re-bank the top portfolio.
Risk Warning: The severe economic downturn has caused bad risks for the industry.