Event: China Merchants Bank disclosed performance KuaiBao, in 2021, the operating income was 331.2 billion yuan, an increase of 14.0% over the same period last year, and the net profit was 119.9 billion yuan, an increase of 23.2% over the same period last year. The 4Q21 defect rate decreased by 2bps to 0.91% on a quarter-on-quarter basis, and the provision coverage rate decreased to 441% on a quarter-on-quarter basis, and the asset quality was in line with expectations.
Interest spreads have stabilized, non-interest rates have risen high, and benchmark banks have excellent revenue and profits: China Merchants Bank's revenue in 2021 increased by 14.0% compared with the same period last year (9M21pura 13.5%), of which 4Q21 revenue increased by 15.6% compared with the same period last year. Revenue improvement is expected to mainly benefit from the stabilization of interest spreads and the positive contribution of non-interest rates. China Merchants Bank's full-year net interest income is exactly in line with our previous expectations (about 203.9 billion yuan), and we expect the full-year net interest margin to remain 2.48% flat compared with the previous three quarters. The growth rate of non-interest income for the whole year is still more than 20% compared with the same period last year, and the proportion of income is expected to be close In 2021, China Merchants Bank's net profit growth rate further accelerated to 23.2% (9M21CAGR:10.1%) compared with the previous three quarters, CAGR increased to 13.6% (9M21 two-year CAGR:10.1%), ROE increased to 16.9% compared with the same period last year, and profitability is expected to remain the first excellent level in the industry.
The non-performing loans continued to decline, and the provision coverage rate is expected to remain the highest in the industry: 4Q21 China Merchants Bank's non-performing loans fell 1.2% quarter-on-quarter, and the non-performing rate dropped 2bps to 0.91% from the previous quarter, the lowest in nearly eight years. 4Q21 provision coverage decreased slightly to 441% quarter-on-quarter, and is expected to remain the highest in the industry. In addition, under the condition that the quality of non-credit assets both on and off balance sheet can be controlled, it is expected that 4Q21 China Merchants Bank will continue to increase the non-credit provision "Tibetan fund" (9M21 sets aside about 45 billion yuan of non-credit provision, accounting for more than 80% of the total impairment loss. We estimate that if we restore the non-credit provision that has been substantially increased since the second half of 2020 to the loan provision, the 3Q21 provision coverage rate has reached nearly 560%). Under China Merchants Bank's extremely strict risk control and consistent and robust risk appetite, we continue to give more stable and sustainable performance growth to better asset quality and a more solid provision base.
Loan growth accelerated, deposit increment in a single quarter was the highest in the year, and structural optimization supported a more stable performance of interest rate spreads:
1 4Q21 China Merchants Bank loan increased by 10.8% compared with the same period last year, and the loan accounted for about 60%. The new loan in the single quarter is still nearly 70 billion yuan (4Q20 increased by about 22.9 billion yuan), which is expected to be mainly contributed by retail. Prior to the exchange of feedback, retail defects such as China Merchants Bank credit cards have improved quarter by quarter and improved more than expected since the second half of 2020; therefore, we have noticed that since 2Q21, China Merchants Bank credit card investment has continued to increase (more than 40 billion yuan in a single quarter), consumer loans have also returned to growth, and it is expected that the retail-based investment structure will be maintained in 2022. In addition, China Merchants Bank also reported that 4Q21 public investment has resumed (prior to the net reduction in 2Q21 and 3Q21 peer loans), and made an early start. By the end of September, the reserve of public projects was sufficient to cover the demand for public projects from last year to this year, and it was mainly in policy support industries such as green gold, new and old infrastructure, and so on. With more sufficient project reserves and more flexible asset disposal, China Merchants Bank's asset-side pricing performance is expected to be more stable than that of the industry in 2022.
China Merchants Bank's deposit performance in 2021 is extremely eye-catching, and he is one of the few listed banks with a positive scissors gap between deposit and loan growth (and the only one among KuaiBao banks that have disclosed their performance so far). 4Q21 China Merchants Bank deposits increased by 12.8% over the same period last year, faster than 3.4pct, and the proportion of deposits reached 75.5%. The deposit increment in a single quarter exceeded 330 billion yuan (accounting for more than 45% of the annual deposit increment), and the debt cost is expected to be further optimized compared with the previous month. Against the background of intensified deposit competition in the industry, a solid deposit base will support a more stable performance of interest rate spreads.
Investment analysis opinion: China Merchants Bank has excellent revenue and profit, stable interest spreads and high non-interest rates support the highest ROE performance in the industry, while asset quality continues to improve, and the "reserve fund" gives a more stable and sustainable performance growth ability. Raise the profit forecast, lower the credit cost of non-credit assets in 2021, and lower the performance growth rate based on prudent consideration. The year-on-year growth rate of homed net profit in 2021-23 is expected to be 23.2%, 16.6% and 17.3%, respectively (18.8% and 20.1% in 2022-23). The current share price corresponds to 1.66x, 1.47x PB in 21 and 22 years, maintaining the "buy" rating and reiterating the long-term track lead portfolio.
Risk hint: a sharp downturn in the economy leads to adverse risks in the industry.