Performance summary: Industrial and Commercial Bank of China's first-quarter net profit increased by 5.7% compared with the same period last year, operating income increased by 6.5% compared with the same period last year, the net interest margin in the first quarter was 2.10%, and the cost-to-income ratio was 17.4%, down 0.2 percentage points from the same period last year. At the end of the quarter, total assets increased by 6.0% over the beginning of the year, loans increased by 4.5%, and deposits increased by 5.8%. The defect rate at the end of the quarter is 1.42%, the provision coverage rate is 210%, and the core tier 1 / capital adequacy ratio is 13.43% and 18.25%. The company's annualized ROA and ROE were 1.01% and 12.22% respectively in the first quarter, down 1BP and 43BP from the same period last year. Industrial and Commercial Bank of China's revenue growth in the first quarter was steady, increased provisions strengthened the ability to resist risks, and performance growth returned to normal. The performance contribution in the first quarter mainly comes from the improvement of scale, non-interest growth and cost-to-income ratio. The company operates steadily and actively, the valuation is low, the dividend yield is 6.1%, the value is prominent, and the overweight rating is maintained.

Support the main points of rating

Steady revenue growth and higher profit growth before provision

Industrial and Commercial Bank of China's net profit in the first quarter grew 5.7% year-on-year, 4.5 percentage points lower than that in 2021 (+ 10.2% precinct YoY), while revenue in the first quarter grew 6.5% year-on-year, slightly slower than in 2021 (6.8% penny YoY). In the case of accelerated scale expansion and steady growth of non-interest income, it was mainly affected by the narrowing of interest spreads compared with the same period last year.

Among them, the company's non-interest net income increased by 6.8% compared with the same period last year, which is basically similar to that in 2021 (+ 6.9% YoY). Of this total, net income from handling fees increased by 1.2 per cent year-on-year (vs2021 year, + 1.4 per cent), other non-interest increased by 15.5 per cent year-on-year (vs2021 year, + 13.7 per cent), and net interest income rose 6.4 per cent year-on-year, 0.4 percentage points lower than in 2021 (+ 6.8 per cent Magi YoY).

Against the background of robust main business and improved cost-to-income ratio, the company's first-quarter pre-provision profit growth rate increased to 6.1% year-on-year compared with 2021 (+ 5.5% score YoY). However, the company stepped up the provision, resulting in a 6.1% year-on-year increase in credit impairment loss in the first quarter (vs2021 year, + 0%), slowing the growth rate of net profit in the first quarter compared with 2021.

The quality of assets is sound and the coverage of provisions is increased.

Industrial and Commercial Bank of China's asset quality is sound, and the defect rate at the end of the first quarter is 1.42% the same as that at the beginning of the year. According to our estimates, the annualized bad generation rate in the first quarter is 0.62%, which is still at a low level compared with the same period last year. 9BP. At the end of the first quarter, the provision coverage increased by 4 percentage points to 210% compared with the previous quarter, to enhance the ability to resist risks.

Valuation

We maintain the company's 2022 EPS 2023 forecast of 1.05 pound 1.13 yuan, the current share price corresponding to the price-to-book ratio of 0.51x/0.46x, maintain the overweight rating.

Main risks faced by rating

Repeated epidemic situation and economic downturn led to the deterioration of asset quality more than expected; supervision and control exceeded expectations.