Industrial Bank (601166) 2019 Interim Report Review: Actively Handle Risks of Stable Operation of Volume and Price


Industrial Bank (601166) 2019 Interim Report Review: Actively Handle Risks of Stable Operation of Volume and Price

In the company’s balance sheet optimization, the allocation strategy is more flexible under ample liquidity environment, and the volume and price factors remain stable.

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Taking into account the increase in risk clearing and provisioning, the profit forecast was slightly reduced to maintain the “overweight” rating.

Industrial Bank’s net profit for the first half of 2019 +6.

6% (first quarter quarter +11.

35%), lower than market expectations.

The second quarter profit growth rate is expected to be due to the decline in operating income growth (Q1 and the first half of the year were +34 respectively.

8% / + 22.

5%). Secondly, provisioning remained positive (asset impairment loss Q1 and twice in the first half of the year were +161% / + 72% respectively), which also dragged down earnings.

Asset expansion accelerated in the second quarter, and interest rate spreads ran steadily.

The company’s net income in the first half of the year increased by 9 per year.

4% (first quarter quarter +12.

7%), the growth rate of Q2 was mainly due to the high base in the same period last year (the interest rate of Q2 in 2018 rose significantly from the previous quarter), and Q2 still saw a slight increase from Q1 from a single quarter.

In terms of volume, the overall expansion of the table in the first half of the year remained stable (total assets +4 from the beginning of the year.

14%), but the speed in the second quarter increased significantly (total assets +4.

4%), mainly due to the increase in credit (focus on high-end manufacturing of public companies, infrastructure, etc. and mortgages for personal loans) and bond investment (other debt investment subjects), until the end of June corporate loans accounted for 45% of total assets.

22%, up 2 from the beginning of the year.

74pcts means that the asset structure continues to be optimized.

In terms of price, the company disclosed that its net interest margin rose to 2% in the first half of the year (January 2018.

83%), mainly due to: ① the loose liquidity brought about the decrease in the cost of interbank liabilities; ② the growth was good and the current account ratio remained stable (despite the increase in average savings costs, but still contributed positively to the interest margin)The proportion of deposits in total debt appreciated earlier and earlier.

87% to 57.

26%.

We believe that the net interest margin of Q2 is basically the same as that of Q1, and it is expected that it will remain stable in the second half of the year. Therefore, the net interest margin is still advancing from 2018.

Non-interest income increased by 44% annually in the first half of the year (+70 in the first quarter.

9%), the high growth mainly comes from: 1) the conversion of new accounting standards to expand the scope of investment income subjects, according to the company ‘s performance conference disclosure, if the factor is eliminated, the non-interest income growth rate for the first half of the year is 31%; 2) Net fee income also achieved a high growth of 17% (+23 in the first quarter).

6%), bank card fees are the main growth point (+46 per year).

3%), benefiting from the rapid expansion of card business (two debit / credit card numbers + 12% / + 29%, credit card transaction volume + 31% increase), secondly, agents, trusts and other businesses also made positive contributions (sometimes+39% / + 54%).

Increased risk exposure and disposal, and proactively provided for and responded.

In the first half of the year, both bad generation and write-offs increased significantly. We calculated that bad write-offs added back to write-offs could be substituted.

63% (January 2018.

49%), from the perspective of segmentation, risk exposure mainly comes from manufacturing, finance, and credit cards (non-performing balance increased in the early and early stages), but the scale of write-offs reached 19.1 billion (2018 28.1 billion, only 8.9 billion in the first half)Thanks to this company’s overall non-performing ratio fell 1BP to 1 from the previous month.

56%, the attention rate is down 23BPs to 1 from the previous month.

81%, the degree of change in loans overdue for more than 90 days and non-performing loans even rose slightly earlier.

71pcts, but remains at 82.

59% level.

Provisions in the first half of the year were more proactive and credit costs reached 1.

57% (January 2018.

42%), of which Q2 decreased slightly compared to Q1; even larger provision was made, but due to prolonged write-offs, provision coverage fell earlier 13

76% to 193.52% (down 12 from the first quarter.

82pcts), but still maintained a high level among comparable stocks.

Risk factors: Deteriorating asset quality beyond expectations.

Investment suggestion: The company’s balance sheet continues to be optimized. The allocation strategy is more flexible under ample liquidity environment, and the volume and price factors remain stable.

Taking into account the increased risk clearance and provisioning efforts, the EPS forecast for common stock shareholders of the parent company in 2019/20 is slightly reduced to 3.

08/3.

37 yuan (previous forecast 3).

2/3.

59 yuan), currently sustainable corresponding to May 2019.

87xPE / 0.

77xPB.

Maintain the “overweight” rating.