On April 22, China Merchants Bank released the first quarter report of 2022, which showed that during the reporting period, the operating income was 91.99 billion yuan, YoY+ 8.5%, and the net profit was 36.022 billion yuan, YoY+12.5%.
The fundamentals are sound and supported, and the growth gap of revenue and earnings has narrowed. In the first quarter of 2022, China Merchants Bank's revenue, pre-provision profit and net profit from home increased by 8.5%, 8.7% and 12.5% respectively over the same period last year, down 5.5,5.8 and 10.7pct respectively from 2021. Under the influence of the company's forward-looking and prudent provision for increased losses, the cost of credit (annualized) rose 0.32pct to 0.81% year-on-year, and the difference in revenue and profit growth narrowed to 4.0pct.
Net interest income maintained a high growth rate, the scale expansion gradually returned to normal, and the net interest margin increased 3bp on a quarter-on-quarter basis. 1) the asset-side expansion is "stable in quantity and price", and the proportion of loans has been generally stable since 2019. China Merchants Bank 1Q interest-bearing assets and loans grew 8.8% and 8.4% respectively from the same period last year, down 1.7% and 2.4% respectively from the end of last year. The proportion of loans increased to 61.8% from the end of last year to 61.8% since 2019. In the first quarter, the new credit structure for public and retail sales is roughly 2.3 per cent. 1Q loan yield rose 1bp to 4.68% quarter-on-quarter. 2) the core debt acquisition ability is strong, and the deposit growth rate is 14.6% higher than that of 1.9pct in the quarter. By the end of 1Q, the proportion of demand deposits decreased by 2.7pct to 63.7% compared with the end of last year, while the proportion of retail deposits increased by 0.4pct to 36.5% compared with the end of last year. In terms of debt costs, the interest-bearing debt cost rate fell 1bp to 1.58% quarter-on-quarter, while the deposit cost rate rose 5bp to 1.46% quarter-on-quarter. The change in the volume and price of deposits may be related to the migration of some retail customers' AUM from financial management to deposit competition products such as large certificates of deposit under the background of the fluctuation of net financial value.
Non-interest income has slowed down in stages, and the steady growth in the number of retail customers has consolidated the cornerstone of wealth business. China Merchants Bank 1Q's non-interest income increased 6.5 per cent year-on-year; of this total, net income from fees and commissions increased 5.5 per cent year-on-year. Affected by the relative downturn in the capital market, wealth management income fell 11.1% compared with the same period last year. We believe that the customer base is the core competitiveness of the retail business. The number of China Merchants Bank retail customers has maintained a good growth trend in the case of a high base, and the customer base structure has been continuously optimized, laying a solid foundation for the development of big wealth management business. Although the consignment business will have its ups and downs due to the periodic changes in the capital market, the wealth management track has a lot of room in the medium to long term.
The defect rate is still below 1%, and the real estate risk is relatively manageable. Affected by factors such as the increase in the number of new real estate loans and the increased risk of retail customers under the influence of the epidemic, the defect rate increased by 3bp to 0.94% compared with the end of the last quarter, but the absolute level is still low. Real estate-related detailed data show that the risk of housing-related assets can be controlled.
Earnings forecast, valuation and rating: China Merchants Bank, as a retail benchmark bank, has a strong customer base management ability. in recent years, with the deepening of the big wealth management business, strong profitability and excellent asset quality. Recent news of personnel changes in the leadership has led to periodic pressure on share prices. We believe that short-term event shocks will not affect the company's strategic strength and sound operating expectations. Under 3.0 mode, the company starts from operating the "bank balance sheet"
The transition to operating the "customer balance sheet" at the same time, focusing on customer value creation to improve business performance, is expected to further open the space for future profit growth. In 2022-24, the EPS forecast is 5.74yuan / 6.70yuan / 7.72yuan respectively, and the corresponding PB estimates are 1.28,1.12and 0.97respectively, maintaining the "buy" rating.
Risk hint: if the epidemic exacerbates macroeconomic pressure, bank credit demand and asset quality may be under pressure.