DBS: Industrial and Commercial Bank of China Ltd – Buy Target Price HK$6.10

<Earnings first take> ICBC (1398 HK) 1H22 results in line with market expectation

What’s new 

• ICBC (1398 HK) reported 1H22 net earnings of c.Rmb 171.5bn, or 4.9% y-o-y growth, in line with consensus expectation of c.Rmb 361bn for FY22F
• Revenue increased by 4.1% y-o-y to Rmb 443.8bn, among which NII increased by c.4.5% y-o-y to Rmb 351.4bn. Fee income increased by 0.1% y-o-y to Rmb 76.0bn.
• NIM dropped by 9bps y-o-y to 2.03%. Asset yield increased by 3bps y-o-y to 3.59% while funding costs increased by 11bps y-o-y to 1.74%.
• Total loan increased by 11.7% y-o-y to  Rmb 22.3tr. Deposit increased by 10.2% y-o-y to Rmb 29.3tr.
• NPL ratio dropped by 1bps from FY21’s level to1.41%. Special mention loan ratio dropped by 12bps h-o-h to 1.87%. Provision coverage ratio increased from 205.84% in FY21 to 207.03% in 1H22.
• ROA/ROE dropped by 3bps/65bps y-o-y to 0.93/11.25% respectively.
• CET-1 ratio dropped by 2bps to 13.29% and CAR ratio increased by 29bps to 18.31% from FY21’s level.

Our view 

• ICBC saw steady revenue and earnings growth in 1H22. NIM decline is in line with market trend while loan growth is better than market average with double-digit y-o-y growth in corporate loans.
• ICBC maintained stable asset quality with dropping NPL and special mention loan ratio. NPL ratio in property sector increased from 4.79% in FY21 to 5.47% in 1H22.
• We currently have BUY with TP at HKD 6.1. The share price is trading at 0.4x FY23 P/B, or below its 5-yr average.