DBS: China Construction Bank Corp – Buy Target Price HK$8.00

<Earnings first take> CCB (939 HK) 1H22 results in line with expectation

What’s new 

• CCB (939 HK) reported 1H22 net earnings of c.Rmb 161.6bn, or 5.4% y-o-y growth, above consensus expectation of c.Rmb 213bn for FY22F
• Revenue increased by 4.7% y-o-y to Rmb 436bn, among which NII increased by c.7.2% y-o-y to Rmb 317.3bn while fee income declined by 0.9% y-o-y to Rmb 68.8bn.
• NIM dropped by 4bps y-o-y or 6bps q-o-q to 2.09%. Asset yield increased by 1bp y-o-y to 3.72% while funding costs increased by 6bps y-o-y to 1.82%.
• Total loan increased by 12.6% y-o-y to  Rmb 19.7tr. Deposit increased by 8.4% y-o-y to Rmb 24.2tr.
• NPL ratio dropped by 2bp from FY21’s level  or flat q-o-q at 1.40%. Special mention loan ratio dropped by 6bps h-o-h to 2.63%. Provision coverage ratio increased from 239.96% in FY21 to 244.12% in 1H22.
• ROA/ROE dropped by 5bps/51bps y-o-y to 1.01/12.59% respectively.
• CET-1 ratio dropped by 19bps h-o-h to 13.4% while CAR ratio increased by 10bps h-o-h to 17.95%

Our view 

• Key highlights of CCB’s 1H22 results include 1) strong loan growth supported by the increasing infrastructure spending in China; and 2) ROE maintained the highest among Big Four despite of some h-o-h drop. 
• Asset quality is showing a stable trend with declining NPL and special mention loan ratio. Coverage ratio is increasing.  NPL ratio in property sector increased from 1.85% in FY21 to 2.98% in 1H22. 
• We currently have BUY with TP at HKD 8. The share price is trading at 0.4x FY23 P/B, or below its 5-yr average.