民生银行(600016.CN)

Minsheng Bank-H:Buy/A:Upgrade to Buy:Results in line,strategy turns defensive

时间:15-09-02 00:00    来源:香港上海汇丰

1H15 profit was RMB26.8bn, up 5% y-o-y, with 2Q15 +4% y-o-y and 1Q15 +6%. 1H15comprised 56% of our FY15e profit (1H14 was 57% of FY14).

What we liked: (i) Fee growth remained strong despite slowing to 35% y-o-y in 2Q from 38%in 1Q. Financial advisory fees (+154% y-o-y in 1H), trust service fees (+40%) and bank cardfees (+31%) were key drivers; (ii) Net interest margin fell 4bp q-o-q in 2Q, slowing from the16bp fall in 1Q; (iii) 1H cost/income ratio improved 1.9ppt y-o-y to 34%; (iv) Minsheng isrelatively conservative in investing in opaque non-standard credit assets, which rose only 1ppth-o-h to 8% of assets (vs peers 20% average).

What we disliked: (i) NPL ratio rose 13bp q-o-q to 1.36% in 2Q, up from 1Q’s +6bp. Writeoffadjusted NPL ratio rose 71bp h-o-h, second fastest among our coverage. 1H credit costpicked up 76bp y-o-y to 160bp. While the bank maintained a loan loss reserve ratio of 2.2%(flat q-o-q), NPL coverage dropped 18ppt q-o-q to 162% (near regulatory minimum 150%).

This will make the bank more passive in provisioning new NPLs and filter directly intoearnings; (ii) Overdue loan ratio rose 114bp h-o-h to 3.88% (overdue <90D loans +31bp to1.78%), with special mention loan ratio up 144bp h-o-h to 3.42%, indicating pressure on NPLformation going forward. It kept micro loans flat h-o-h and loan mix fell 1.6ppt to 21%.

Other points: (i) Tier-1 ratio rose 58bp h-o-h to 9.17%, mainly on the RMB20.5bn equityincrease from the conversion of CBs (66bp to Tier-1); (ii) Loan and deposit growth trendremained stable at 15% / 9% y-o-y in 2Q; (iii) Demand deposit mix fell 4.4ppt h-o-h to 30.5%;(iv) According to Caixin (30 July), Mr Zheng Wanchun, currently the VP of a SOE bank, isconfirmed to take Minsheng’s President position, which has been vacant for over half a year.

Buy rating on Minsheng-H with a TP of HKD12.80 (from HKD13.20 on FX assumptionchange); upgrade Minsheng-A to Buy (from Hold) on valuation, RMB10.70 TP unchanged.