Event
On January 14, China Merchants Bank disclosed the performance of KuaiBao in 2021, with an annual operating income of 331.23 billion yuan, an increase of 14.0% over the same period last year (9M2113.5%), and a net profit of 119.92 billion yuan, an increase of 23.2% (22.2%) over the same period last year.
The 4Q21 defect rate decreased by 2bps to 0.91% quarter-on-quarter, and the provision coverage ratio decreased by 1.8pct to 441.3% quarter-on-quarter, and the asset quality was in line with expectations.
Brief comment
1. Revenue and profits accelerated faster than expected, highlighting the stable and high-growth profitability of leading banks through the cycle. China Merchants Bank's annual revenue increased by 14.0% over the same period last year, which is higher than that of 9M21 by 0.5pct. Under the dual benefits of faster revenue and less pressure on provision provision, the growth rate of net profit of home ownership has accelerated, and the growth rate of net profit of home ownership for the whole year has increased by 23.2%, which is higher than that of 9M21 by 1.0pct.
For the whole year, ROE reached 16.94%, an increase of 1.21pct over the same period last year. In the long run, China Merchants Bank's revenue and return net profit grew at a 5-year compound growth rate of 9.6% and 14.1% respectively. The ROE remained at a high level of 15.7% and 17.0%, respectively, highlighting the steady and high growth profitability across the cycle.
2. The rise in volume and price has led to double-digit growth in net profit income, while non-interest income has maintained a high-speed increase of more than 20%. China Merchants Bank's total loan volume in 2021 increased by 10.8% compared with the same period last year, which was 0.9% higher than the 9M21 growth rate. The single-quarter net interest margin (measured) of 4Q21 was 2.48%, and the month-on-month increase in 1bp was mainly due to the cost reduction driven by the improvement of the debt structure. Driven by the rise in volume and price, net interest income grew 10.2 per cent year-on-year, 1.5 per cent higher than 9M21 growth.
At the same time, non-interest income maintained a rapid growth rate of more than 20%, with a year-on-year growth rate of 20.7%. Driven by the big wealth management value cycle chain, the large wealth sector has made a significant positive contribution to revenue.
3. The bad has been declining for two consecutive quarters, and the advantage of asset quality has been consolidated. The bad balance of 4Q21 China Merchants Bank was 50.69 billion, down 1.2% from the previous month, the defect rate was 0.91%, the 2bps was down from the previous month, and the bad rate remained in the first echelon of listed banks for two consecutive quarters. The 4Q21 provision coverage rate is 441.3%, a month-on-month decrease of 1.8pct, and a month-on-month decline. First, because the asset quality continues to improve in essence, and the defect generation rate remains low, and second, because China Merchants Bank's provision coverage rate is as high as 441.3%, which is more than twice the average value of listed joint-stock banks. At the same time, it also significantly exceeds the regulatory requirements of 300% provision coverage, as a national bank. It is expected that it will be difficult for the provision coverage to continue to increase significantly at the current level.
4. Profit forecast and investment advice: China Merchants Bank's performance in the fourth quarter has accelerated, and the bad performance has declined for two consecutive quarters. The important contribution of the light asset strategy and the large wealth plate has gradually emerged. China Merchants Bank, as a high-quality leading bank, the leader of the big wealth track and the target of stable and high growth across the cycle, the valuation has not yet fully reflected the real value. We estimate that the revenue of China Merchants Bank 2022max 2023 will increase by 14.1% and 14.4% year-on-year, and its net profit will increase by 20.8% and 20.9% compared with the same period last year. The current share price corresponds to 1.46 times the 22-year PB, maintaining the buy rating and the first combination of the banking sector, with a target price of 65.90 yuan, corresponding to 2.0 times the 22-year PB.
Risk hint: a sharp decline in the macro-economy, leading to adverse risks of banks.