民生银行(600016.CN)

Minsheng Bank (1988HK/600016CH):Buy,Loan book de-risking continues

时间:15-11-02 00:00    来源:香港上海汇丰

Strong trends in fee income growth and cost-efficiencyimprovement driving pre-provision earnings growth of 21%y-o-y

Margins fell as loan book de-risking continues but pace inNPL rise has stabilised to peer-average level; tier-1 ratio fallof 15bp q-o-q in 3Q15 a puzzle

We maintain our Buy ratings with H-/A-share target prices ofHKD12.80 / RMB10.70 our estimates are unchanged

3Q15 profit of RMB11.6bn, up 3% y-o-y, slightly down from 2Q’s 4%. 9M15 profitsaccount for 80% of HSBC’s FY15 estimates (vs 83% in 9M14).

What we liked: (i) 3Q15 fee growth was 37% y-o-y, up from 2Q15’s 35%, driven by bankcard, trust and agency services and investment banking; (ii) cost-to- income ratio improved by2.7ppt y-o-y to 35% in 9M15. Expense growth was only 1% y-o-y in 3Q15. (iii) NPLcoverage remained flat q-o-q (162%) and loan loss reserve ratio was up 15bp q-o-q to 2.35%.

What we disliked: (i) net interest margins (NIM) fell by 16bp q-o-q in 3Q vs. 2Q’s 4bpfall. We think this was driven by downward pressure on asset yields, which has fallen asMinsheng continues to de-risk its loan portfolio. In 1H15, its small-micro-enterprise loanmix fell by 1.6ppt h-o-h to 21%, while its mortgage mix rose by 0.7ppt, which helpedcontribute to its average loan yield falling by 50bp h-o-h. (ii) Tier-1 ratio fell 15bp q-o-q(from up 35bp in 2Q) to 9.02%.

Other points of interest: (i) NPL ratio rose 10bp q-o-q in 3Q15 to 1.45%, slower than2Q15’s 13bp rise. Adjusted for write-off and disposals, NPL ratio rose by 41bp q-o-q in3Q15, in line with the average of mid-sized banks. Credit cost was up another 27bp q-o-qor 62bp y-o-y to 200bp in 3Q15; (ii) Loan to deposit ratio fell 1ppt q-o-q to 73%.

Buy rating on Minsheng-H with TP of HKD12.80; maintain Buy and TP ofRMB10.70 on Minsheng-A: We use a discounted Gordon Growth model valuation,valuation & risks on p.2.