<Earnings first take> BOC (3988 HK) 1H22 results above market expectation
- BOC (3988 HK) reported 1H22 net earnings of c.Rmb 120bn, or 6.3% y-o-y growth, above consensus expectation of c.Rmb 213bn for FY22F
- Revenue increased by 3.6% y-o-y to Rmb 313.6bn, among which NII increased by c.7.3% y-o-y to Rmb 224bn while fee income declined by 7.8% y-o-y to Rmb 43.1bn.
- NIM was flat y-o-y or +2bps q-o-q to 1.76%. Asset yield increased by 3bps y-o-y to 3.29% while funding costs increased by 4bps y-o-y to 1.66%.
- Total loan increased by 10% y-o-y to Rmb 16.95tr. Deposit increased by 8.2% y-o-y to Rmb 19.5tr.
- NPL ratio increased by 1bp from FY21’s level or increased by 3bps q-o-q to 1.34%. Special mention loan ratio dropped by 6bps h-o-h to 1.29%. Provision coverage ratio dropped from 187.05% in FY21 to 183.26% in 1H22.
- ROA/ROE dropped by 2bps/35bps y-o-y to 0.91/11.62% respectively.
- CET-1 /CAR ratio increased by 3bps/46bps h-o-h to 11.33%/16.99% respectively.
- BOC earnings growth is above expectation. Its earnings growth is the highest among the Big Four Banks.
- Its NII growth of 7.3% is among the upper end of peers. Key highlight is its NIM, which managed to stay flattish y-o-y while most peers saw 5-10bps of NIM drop in 1H22. Fee income decline is mainly due to a lower WM services with high market volatility, which is in line with market trend.
- Asset quality is overall stable. NPL ratio in property sector increased from 5.05% in FY21 to 5.67% in 1H22. Overall NPL ratio in corporate loans is showing an improving trend from 2.2% in FY21 to 2.03% in 1H22 while NPL ratio in retail loan deteriorated from 0.52% in FY21 to 0.6% in 1H22.
- We currently have BUY with TP at HKD 3.85. The share price is trading at 0.3x FY23 P/B, or below its 5-yr average.