招商银行(600036):Q4息差环比小幅改善 财富管理业务稳健发展

China Merchants Bank (600036): Q4 interest spreads slightly improved month-on-month, steady development of wealth management business

東興證券 ·  03/28  · Researches

Incident: On March 24, China Merchants Bank announced its 2022 annual report (previously published performance report). It achieved revenue, profit before provision, and net profit of 3,447.8, 2,284.0, and 138.1 billion yuan in 2022, up 4.1%, 4.4%, and 15.1%, respectively. The weighted average ROE was 17.06%, an increase of 0.1 pct over the previous year. The reviews are as follows:

Non-interest rates dragged down revenue growth slightly, making provision for a rebound in net profit growth. Revenue of 344.78 billion was achieved in 2022, and the year-on-year growth rate fell 1.2 pct to 4.1% from the previous three quarters, mainly dragged down by non-interest income; net profit growth increased 0.9 pct to 15.1% from the previous three quarters. Let's take a look at the specific disassembly:

Net interest income: 7% year-on-year increase (growth rate decreased 0.6% month-on-month). Mainly due to a slowdown in credit scale growth and a further narrowing of net interest spreads month-on-month, the decline has abated somewhat.

Net non-interest income: down 0.62% year on year (growth rate down 2.5 pct month-on-month). ① Wealth management dragged down a slight decline in the middle income, and the base of the retail customer base was consolidated: net revenue from processing fees was 94.28 billion, down 0.2% from the previous year; it was mainly affected by the decline in revenue from wealth management (down 14.3% year on year). Among them, revenue from consignment funds and trust products declined markedly, mainly due to the turbulence and decline in the capital market last year, the size of agency funds, especially equity funds, declined, and companies actively reduced the pressure on financing trust products; agency insurance revenue grew rapidly, up 51.3% over the previous year, accounting for 40.2% of wealth management revenue. However, the expansion of the retail customer base has had good results, and the customer base has been further consolidated. At the end of the year, there were 184 million retail customers, and the retail AUM was 12.1 trillion yuan, up 6.36% and 12.68% respectively from the beginning of the year. Among them, the number of Golden Sunflower and above customers and AUM increased by 12.84% and 11.66%, respectively, while the number of private bank customers and AUM increased by 10.43% and 11.74%, respectively. Revenue from wealth management is expected to recover as capital markets pick up in 2023. ② The capital market fluctuated, and other non-interest income declined year-on-year: other non-interest income reached 32.27 billion yuan throughout the year, a year-on-year decrease of 1.87%. Among them, due to fluctuations in the capital market bond market, investment income fell 6.01% year on year, and profit and loss from changes in fair value decreased by 2.77 billion yuan year on year, which was the main drag.

Provision: In 2022, the company reduced credit impairment losses and calculated backfeed profits, which was 9.21 billion dollars less than the previous year, down 14.0% year on year; net profit growth rate increased 15.1% year on year, up 0.9 pct from month to month. Among them, financial investment and interbank asset allocation requirements have been reduced.

The growth rate of loans has slowed, and deposit growth has been impressive. By the end of 2022, loans increased 8.6% year on year, slowing 0.4 pct from the end of the third quarter; loans increased only 0.95% month-on-month, of which public loans increased 3.95% month-on-month, retail loans fell 0.06% month-on-month, and bill discounting fell 5.72% month-on-month. At the end of the year, deposits increased 18.7% year on year, and the growth rate reached a new high in recent years; structurally, current accounts accounted for 63.0%, which rebounded from month to month, and the debt advantage was further consolidated. Looking ahead to 2023, the recovery in consumption is expected to boost demand for retail credit, leading to a gradual improvement in total credit volume and structure.

Net interest spreads rebounded slightly month-on-month in the fourth quarter. Net interest spreads in 2022 were 2.4%, down 1BP month-on-month (the decline narrowed somewhat); among them, 4Q22 single-quarter interest spreads rebounded 1BP to 2.37% month-on-month. Looking at the split, the main contribution to the month-on-month recovery in single-quarter interest spreads came from widening interbank interest spreads (+30BP month-on-month), while deposit and loan spreads continued to narrow (3BP month-on-month). Looking ahead to 2023, it is expected that the pressure to narrow net interest spreads will still exist. On the one hand, the repricing of mortgage loans affected interest spreads in the first quarter; on the other hand, the prices of newly issued loans have continued to decline since this year. However, considering that deposit costs are expected to gradually fall due to interest rate transmission, the downward pressure on interest spreads may ease somewhat.

Asset quality has remained stable overall, putting pressure on public real estate and retail loans. The non-performing loan ratio at the end of the year was 0.96%, up 1BP from the previous month. Among them, the non-performing ratio for public loans fell 13BP to 1.25% month-on-month, mainly due to continued exposure to risks in the real estate industry (the non-performing rate of public real estate loans was 3.99%, an increase of 67BP over the previous month). The non-performing rate of retail loans increased by 7BP to 0.9% month-on-month. Among them, the non-performing rates for credit cards and consumer loans increased by 10BP and 13BP to 1.77% and 1.08%, respectively, mainly due to the impact of the epidemic. Judging from the non-performing loan generation situation, the non-performing loan generation rate in 2022 was 1.15%, up 2BP from the previous three quarters. Judging from forward-looking indicators, interest loans accounted for 1.21% at the end of the year, an increase of 7 BP over the previous year. Looking ahead to 2023, with the optimization of real estate financing policies and improved sales, it is expected that bad generation in the real estate sector will decrease year over year, and risks will gradually be cleared; in terms of retail loans, as the impact of the epidemic subsides and the economy and consumption recover, the bad generation situation will gradually improve, and asset quality is expected to remain stable throughout the year.

Investment advice: In 2022, the company was under the double pressure of real estate risk exposure and the downturn in retail business sentiment under the influence of the pandemic. Revenue growth slowed, provision was made to feed back net profit to achieve steady growth, further increase ROE, and maintain steady asset quality. Looking ahead, as the economy and consumption recover, demand for retail loans and wealth management picks up, CMB's retail advantage is expected to be highlighted, catalyzing fundamental and valuation restoration.

Net profit growth in 2023-2025 is expected to be 14.1%, 14.9%, and 15.3%, respectively, and the corresponding BVPS is 38.9, 46.1, and 54.4 yuan/share, respectively. The closing price on March 27, 2023 was 34.43 yuan/share, corresponding to 0.88 times 2023 PB. We are optimistic about CMB's leading business model, operating model, and organizational model. Big Wealth Management's value cycle chain is expected to continue to strengthen, consolidate the company's market competitiveness, and maintain a “highly recommended” rating.

Risk warning: The economic recovery, the recovery of physical demand fell short of expectations, and the unanticipated shift in monetary policy and financial supervision policies had an impact on the bank's operating environment. The speed of bank expansion, the level of net interest spreads, and asset quality were impacted.

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