This report is read as follows:
Industrial and Commercial Bank of China's 2021 annual report slightly exceeded market expectations, and net profit growth returned to double-digit growth after 2014, showing confidence in future business development and performance growth.
Main points of investment:
Investment suggestion: considering the performance improvement brought about by adverse improvement, Industrial and Commercial Bank of China's net profit growth forecast for 2022-2024 is 10.42% (+ 2.56pc) / 8.99% (+ 1.55pc) / 8.94% (new), EPS1.05 (+ 0.02) / 1.15 (+ 0.04) / 1.25 yuan, BVPS8.91/9.73/10.63 yuan. The current price corresponds to 0.53 prime 0.48 PB from 2022 to 2024. Maintain the target price of 6.95 yuan, corresponding to 0.78 times PB in 2022, and maintain the overweight rating.
Profit growth is back to double-digit growth. 2021A homed net profit increased by 10.27% over the same period last year, which means that cumulative net profit growth has returned to double-digit growth since 2014. Among them, the net profit growth rate of Q4 in a single quarter was 10.65%, which was basically the same as that of Q3. The driving factors for the rebound of cumulative net profit growth are: ① net interest margin stabilized quarter by quarter, and the measurement caliber began to broaden compared with the same period last year; ② Q3 began to pick up the growth rate of net fee income; ③ credit costs declined quarter by quarter since 2021; asset quality improved significantly. The 2021Q4 defect rate dropped sharply to 1.42% month-on-month, and the provision coverage rate increased 9pc to 206% month-on-month. The book index has been significantly improved, which is mainly due to the decline in the bad generation rate and increased efforts to deal with it. Among them, the defect rate of the real estate industry rose 50bp to 4.79% compared with 2021H1, the increase and risk exposure can be controlled, and the contribution of retail business continues to increase. 2021A retail business revenue accounted for 40.2%, pre-tax profit accounted for 46.0%, respectively increased 0.5pc, 1.5pc compared with the same period last year, indicating that the first personal financial strategy has been further promoted, and the contribution of retail business has continued to increase.
Risk hint: the economic downturn is greater than expected; real estate risk exposure is accelerated.