Bank of Communications-Buy:Yet another quarter of flat in-line earnings growth

2015-08-28 来源:香港上海汇丰银行有限公司 字号: 12 14
     1H15 NPAT was RMB37.3bn, up 1% y-o-y. NPAT growth in 2Q15 remained slow at1% y-o-y, the same rate as 1Q15. 1H15 NPAT tracked 58% of our FY15e.
    What we liked: (i) Solid fee income growth of 23% y-o-y in 1H15 (2Q15’s y-o-y was18%, 1Q15’s y-o-y was 29%), primarily driven by investment banking (49% y-o-y) andmanagement services (39% y-o-y). While capital markets have weakened, there should nolonger be drag on fee growth from a high base caused by tougher fee regulationsintroduced in Aug. 2014; (ii) 1H15’s cost-to-income ratio improved 1ppt y-o-y to 36%;(iii) Risk weighted assets to total assets ratio dropped 3ppt q-o-q to 63%.
    What we disliked: (i) Tier 1 ratio fell 44bp h-o-h (-35bp q-o-q) to 10.86% due to the2014 final dividend payment; (ii) 1H15 ROE remains relatively low at 15.6%, down 1.6%y-o-y; (iii) Demand deposit mix fell 0.9ppt q-o-q to 43.8%, driven by 2.9ppt drop incorporate demand deposit mix.
    Other points of interest: (i) 2Q15 credit costs rose 5bp q-o-q vs. 1Q15’s 16bp q-o-q rise;(ii) Provisioning coverage ratio was down 2ppt q-o-q to 170%. The loan loss reserve ratiorose 6bp q-o-q to 2.30%; 2Q15’s net interest margin (NIM) fell 4bp q-o-q to 2.25% vs.
    1Q15’s 4bp q-o-q rise; (ii) NPL ratio rose 5bp q-o-q to 1.35% vs 1Q15’s 5bp rise. Thespecial mention loan ratio rose 8bp q-o-q to 3.24%. Overdue loans ratio rose 61bp h-o-hto 1.91%; (iii) Loans to micro, small and medium enterprises (MSME) rose 1% q-o-q, lessthan the 3% q-o-q rise in total loans, with its ratio to total loans down 1ppt q-o-q to 35%.
    Buy rating on BoCOM-H with a TP of HKD9.50 (cut 2% from HKD9.80 on a lowerCNYHKD assumption); upgrade BOCOM-A to Buy and maintain TP of RMB7.90. Weuse a discounted Gordon Growth model to value BoCOM. See pg. 2 for valuation & risks.