China Merchants Bank (600036): Asset quality helps initial operations stabilize

China Merchants Bank (600036): Asset quality helps initial operations stabilize

Event: China Merchants Bank announced its 2019 results.

Initially realized revenue of US $ 2,698 trillion, an annual increase of 8.

5%, of which net interest income was US $ 173.1 billion, an annual increase of 7.

9%; net non-interest income was 9.67 million yuan, a year-on-year increase of 9.

6%.

The net profit attributable to shareholders of the parent company was 92.9 billion yuan, an increase of 15 per year.

3%.

The growth rate of net profit attributable to mothers has accelerated quarter by quarter, achieving a growth rate of 15.

3% slightly exceeded market expectations.

The savings in impairment charges better hedged the decline in revenue growth, and the logic of credit cost savings continued to materialize when the company’s asset quality was stable.

  1) On the income side, the downward trend in asset pricing is the initial stage of Q4 revenue.

The company’s 1Q19, 1H19, 9M19 financial reports showed that the net net difference fell quarter by quarter (2.

72%, 2.

70%, 2.

(65%), our 4Q19 single quarter NIM is -10 + bps (beginning-end-end caliber), which is expected to be due to the decline in the pricing of newly issued loans and the adjustment of the asset structure 北京夜网 under a fully desirable scale.

In 2020, there is still a need to focus on the realization of the comparative advantage of interest margins.

  2) On the cost side, under the credit cost savings, the logic of impaired profit-feeding continued to materialize.

The company’s operating expenses in 4Q19 were +3 year-on-year.

1%, driving up 19A operating expenses (9M19: 9.

4%; 19A: 7.

5%).

  Benefiting from the impaired cost savings brought about by the poor net income generation, it was finally attributed to the rapid growth of mother net profit quarter by quarter (1Q19-4Q19: 11).

3% / 14.

9% / 17.

7% / 18.

6%).

  3) In terms of profitability, the upward trend of ROA / ROE remains unchanged.

The company’s ROA has been increased by at least 8bps to 1.

32%, ROE exceeds 0.

27 points to 16.

84%, all of them are 北京体验网 at the first echelon level.

The double-digit growth in deposits and loans led to the steady expansion of assets.

China Merchants Bank’s 19A loan size has grown by 14 in ten years.

2%, deposit growth is also relatively positive (ten years +10.

1%), the increase in the scale of deposits and loans has led to an average increase in assets and liabilities of nearly 10%.

As the scale growth of 19Q3 is better than the historical growth rate, the overall asset growth rate of Q4 company has been controlled.

On the whole, the company’s deposits and loans in 2019, the growth rate of assets and liabilities have reached the highest level.

The non-performing rate dropped further to 1.16%, asset quality continued to be consolidated.

The company achieved a non-performing rate in 4Q19, with a double reduction in non-performing amount, and a non-performing rate decreased by 3bps to 1.

16%, the amount of non-performing loans decreased by 1.2 billion to 52.1 billion.

  As of 9M19, the company’s overdue 90 + / NPL ratio was about 80%, and the net NPL ratio was maintained at the same level. The NPL ratio and provision coverage ratio were at the first echelon level among the stock companies.

We maintain the previous view. After the consolidation of the company’s asset quality from 2015 to 2017, the provision level tilted to a controversial safety pad for other joint-stock banks. In the future, the cost of credit will also be relatively stable due to the generation rate of replacement.Savings will continue to feed back profits.

We have slightly adjusted the company’s profit forecast and expect EPS to be 4 in 2020 and 2021.

10 yuan and 4.

61 yuan, the final net asset is expected to be 26 by the end of 2020.

10 yuan.

Calculated at the closing price of 2020-1-17, the corresponding PE for 2919-2020 is 9 respectively.

2x / 8.

2x, corresponding to 1 at the end of 2020.

45 times.

We maintain our prudent overweight rating on the company.

  Risk Warning: Asset quality fluctuates more than expected, middle income and scale expansion