Morgan Stanley-China Banks 2Q24 Wrap Earnings remained largely stable, bu...-110098773
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China Banks: 2Q24 Wrap | Asia Pacific
Earnings remained largely
stable, but larger divergence
among SOE banks
Richard Xu, CFA
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Chiyao Huang
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Beryl Yang
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Asia Pacific
Banks generally reported stabilizing NIM and profit growth in
2Q24, but fee income remained pressured. There are bigger-
than-expected divergences in core operating trends among SOE
banks, with ABC and BOC showing positive revenue and PPOP
growth, but notably weaker trends at ICBC and BoCom.
!
NIM for banks we cover fell a modest 2bp, on average, in 2Q24, in a 2Q of more
stable NIM helped by lower deposit and funding costs due to policymaker and bank
efforts to reduce deposit costs. In particular, NIM rebounded at CITIC Bank, ABC, and
BoCom, due to more rational loan pricing and more notable deposit cost cuts. But
ICBC, PAB and Bank of Chengdu showed notably above-peer qoq and yoy NIM
decline due to quicker weakening loan pricing power at ICBC and Chengdu and de-
rising efforts at PAB. Generally, we have seen more conservative loan growth across
banks in 2Q24, a trend that should support loan yield, if continued. We have also
seen deposit flow from SOE banks to smaller banks as regulators ban the manual
supplement deposit rates, which should continue to benefit bank NIM in 3Q24.
"#$ %"
&&'&(!Banks generally reported double-digit fee income decline due to
fee rate cuts in 3Q23, and capital market and credit card weakness – partly offset by
still good investment gains. We expect fee income pressure to moderate in 2H24 vs.
2H23's lower base. The wider divergence in NIM and noninterest income growth has
led to wider revenue growth divergence, with Ningbo and Hangzhou leading, at 7-9%
yoy growth, aided by a healthier Zhejiang economy, but there was more notable
revenue decline at PAB, ICBC, BoCom and Everbright. In addition, different cost
efficiencies led to even bigger divergence in PPOP growth, with Ningbo leading
banks, at 11.7% yoy; PPOP fell 12-13% yoy at ICBC, BoCom and PAB.
)"*%")+
&+",#((#!Many
banks reported notable increase in overdue and Special Mentioned Loans in 2Q24,
both qoq and yoy, as both economic cycle and more rational credit growth led to
more credit quality pressures. Positively, overall NPL ratios remained largely stable
for banks, as most front loaded NPL recognition even before loans are overdue, with
NPL to 90 overdue loan ratio reaching close to 200% at SOE banks and 155% for all
banks, on average. More rational credit growth and active NPL digestion should help
reduce future risks, particularly as China banks still have ample NPL coverage, with
loan loss reserves at 350% of more than 90-day overdue loans. Among banks we
cover, CCB bucked the trend, showing improvement in overdue and SML loans.
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companies covered in Morgan Stanley Research. As a result,
investors should be aware that the firm may have a conflict of
interest that could affect the objectivity of Morgan Stanley
Research. Investors should consider Morgan Stanley
Research as only a single factor in making their investment
decision.
For analyst certification and other important disclosures,
refer to the Disclosure Section, located at the end of this
report.
+= Analysts employed by non-U.S. affiliates are not registered
with FINRA, may not be associated persons of the member
and may not be subject to FINRA restrictions on
communications with a subject company, public appearances
and trading securities held by a research analyst account.
August 30, 2024 08:41 PM GMT
M
Summary of 2Q24 Results
ABC, Industrial bank, Hangzhou Bank, and Ningbo Bank reported above-peer operating
trends, while CEB showed weaker trends on more operating metrics.
,7,-!)'!)
ICBC CCB BOC ABC BoCom PSBC CMB PingAn Industrial Minsheng Citic Everbright CRCB SPDB Ningbo Chengdu Hangzhou Beijing
Net interest inc YoY 1 1 1 1 1 1 1 1 1 1
NIM QoQ 1 1 1 1 1 1 1 1
Fee inc YoY 1 1 1 1 1 1 1 1 1
Operating income 1 1 1 1 1 1 1 1 1 1
Cost/inc YoY 1 1 1 1 1 1 1 1 1
PPOP YoY 1 1 1 1 1 1 1 1 1 1 1
Net profit YoY 1 1 1 1 1 1 1 1
ROE YoY 1 1 1 1 1 1 1 1 1 1
Deposit QoQ 1 1 1 1 1 1 1 1 1 1
interbank asset QoQ 1 1 1 1 1 1 1 1
Tier 1 QoQ 1 1 1 1 1 1 1 1 1
NPL ratio QoQ 1 1 1 1 1 1 1 1 1 1 1 1 1
NPL coverage QoQ 1 1 1 1 1 1 1 1
Special mention loan ratio HoH 1 1 1 1 1 1 1 1 1 1
Score 6 5 8 12 6 7 7 6 9 6 8 4 6 10 9 7 9 8
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2Q24 YoY
on
MS estimate
on
Consensus estimate
ABC 65,506 6.2% 50.3% 51.7% 49.5% 2.2%
ICBC 82,814 -0.9% 46.7% 47.8% 47.7% 0.0%
CCB 77,509 -1.4% 49.2% 49.7% 49.8% -0.1%
BOC 62,612 0.3% 50.8% 52.2% 51.8% 0.4%
BoCom 20,299 -5.2% 48.8% 50.0% 49.6% 0.3%
CMB 36,666 -0.7% 50.1% 51.1% 51.7% -0.6%
Citic 16,299 -3.7% 52.1% 54.1% 53.8% 0.3%
Minsheng 9,043 -5.3% 61.6% 68.4% 66.4% 2.0%
Everbright 12,061 3.1% 62.9% 63.1% 59.0% 4.1%
CRCB 3,834 26.3% 66.0% 65.4% 64.1% 1.3%
PSBC 22,889 -1.7% 56.5% 58.9% 57.5% 1.5%
PingAn 10,947 1.5% 54.9% 56.4% 54.6% 1.8%
Industrial 18,713 6.5% 55.3% 56.4% 55.3% 1.1%
SPDB 9,567 30.9% 73.3% 65.4% 63.0% 2.4%
Ningbo
6,636 4.5% 48.5% 49.7% 50.7% -1.0%
Hangzhou
4,863 19.0% 63.2% 60.0% 57.9% 2.1%
Chengdu
3,316 8.7% 47.6% 47.9% 47.8% 0.2%
Beijing
6,715 -0.4% 56.5% 57.9% 55.6% 2.3%
Big 5 -0.2% 49.2% 50.3% 49.7% 0.6%
Avg-total 4.9% 55.2% 55.9% 54.8% 1.1%
Run rate
difference
(1H24 vs 1H23)
Net profit
1H24 runrate %
1H23 runrate %
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More stable profit growth with wider divergence in revenue
and PPOP growth
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• As suggested by NAFR industry data, overall SOE banks showed an improving yoy
profit trend; ABC led the group with 6.2% yoy profit rebound, while BoCom profit
turned to a 5.2% yoy decrease.
• CCB, ICBC and BOC were able to narrow profit decline from >2% in 1Q24 to
around zero in 2Q24 with lower credit cost.
• Average profit growth for all banks picked up from 1.5% yoy in 1Q to 4.9% yoy in
2Q, mainly led by SPDB (+30.9% yoy) and CRCB (+26% yoy).
• Industrial showed the most notable improvement within JSBs, turning from a 3.1%
yoy decline in 1Q to a 6.5% yoy increase in 2Q24.
• BoCom, MSB and CITIC saw weaker profit, down 4-5% yoy.
-'(/"(*("
#%#(# ((!
• ABC, BoCom, CITIC, CRCB and SPDB showed QoQ increase in NIM, led by CITIC
+14bps QoQ, which we think could be helped by a smaller loan yield decline, a one-
off funding cost saving from manual interest payment cleanup, and previous
deposit rate cuts passing through.
• PAB NIM slipped 10bps QoQ still due to derisk.
• ICBC, CCB and Hangzhou also reported QoQ lower NIM by 6-10bps. Notably, ICBC's
NIM has fallen to the lowest among the big 4 in 2Q24, at 1.38%, while it was the
second highest a year ago.
),"(#
Fee income remained pressured due to various fee rate cuts on the wealth management
side, offset by bond-related investment income. On average, our covered banks saw 12.6%
yoy decline of fee income in 2Q, vs. 11.1% yoy decline in 1Q. Including investment gains, our
covered banks' non-interest income is flat yoy.
• Except for ABC, other SOE banks' fee income decline accelerated in 2Q24 to
double-digit levels.
• Minsheng's and Chengdu's fee income performed better, -7.9% yoy and +43% yoy,
respectively, likely due to a low base.
0 %""&&'&
Revenue: Although average revenue trend is similar to 1Q24: -1.2% yoy, there was wider
divergence driven by NIM performance.
• Among SOE banks, ABC and BOC turned to positive revenue growth, to 2.6% and
2.1%, respectively, in 2Q24. ICBC revenue decelerated notably, down 8.8%, weighed
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时间：2024-09-13
