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<Research>CICC Predicts 1% NP Growth in 1Q for CN Banks; Div Stability & Operational Sustainability Support Partially Shr Price
Recommend 107 Positive 176 Negative 76 |
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CICC forecasted in a report that the revenue of listed Chinese banks in 1Q will fall by 4% YoY, while their net profit will grow by 1% YoY, with profit growth continuing to weaken compared with last year. The pressure on bank revenue is mainly due to the continued decline in interest margins and wealth management income. In terms of asset quality indicators, CICC is concerned about the trend of non-performing loans, and expected a decline in the provision coverage ratio and a slight slowdown in net profit growth. According to CICC, the pace of asset expansion is slowing down, and some banks may experience a contraction of their balance sheets. Interest rate spreads will continue to narrow and wealth management income will be weak, dragging down revenue performance. Considering that loan repricing is still occurring, interest rates on new loans and bonds are falling, and the phenomenon of deposit regularisation still exists, it is expected that listed banks' net interest margins will narrow by 6 bps QoQ in 1Q, with corresponding interest rate spreads declining by 25 bps YoY, dragging net interest income down by 5% YoY. Furthermore, net handling fee income is expected to decline by 10% YoY due to the reduction in fund and insurance agency fee rates and the still-low risk appetite of residents for financial asset allocation. Other non-interest income is expected to grow by 11% YoY, benefiting from the decline in market interest rates. CICC estimated listed banks to have a provision coverage ratio of 242% at the end of last year, which is still a long cushion from the regulatory minimum of 120% to 150%, and there is room to support net profit, which is also one of the basic elements for supporting dividend stability. Of course, if interest margins and non-interest income fall short of expectations, and the non-performing rate rises beyond expectations, it will lead to a faster depletion of provisions. CICC noted that although listed banks' earnings growth is expected to weaken, dividend stability and operational sustainability will provide some support to their share price performance. State-owned large banks, due to their stability, still have allocation value, with the current A-share dividend yield at 5%-5.5% and H-share dividend yield at 7.3%-9%. CICC also considered the dividend yield of some high-quality leading regional banks attractive, while also suggesting a focus on regional banks with performance stabilising and bottoming out, such as MINSHENG BANK (01988.HK). AAStocks Financial News |
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