瑞信看好中国大银行中国银行业2018419103页

DISCLOSUREAPPENDIXATTHEBACKOFTHISREPORTCONTAINSIMPORTANTDISCLOSURES,ANALYSTCERTIFICATIONS,LEGALENTITYDISCLOSUREANDTHESTATUSOFNON-USANALYSTS.USDisclosure:CreditSuissedoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethattheFirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.19April2018AsiaPacific/ChinaEquityResearchBanksChinaBanksSectorResearchAnalystsChungHsu,[e-mail]@[e-mail]@credit-suisse.comASSUMINGCOVERAGEPositionformoreupside;preferbigbanksFigure1:Sector'sprofitgrowthshouldaccelerateto10.9%in2018ESource:Companydata,CreditSuisseestimates■Moreearningsupsideforlargebanks.Webelievethebigbanksarepoisedformoreearningsupsideonbettercoreprofitsandlowercreditcosts.NIMimprovementhasbeenstrongerthanexpectedsince4Q17andthetrendissettocontinueatleastinto1Q18withloanyieldsandmarketratesstilltrendinghigher.Meanwhile,theextraprovisionstakenbybigbanksin2H17,amidimprovingassetquality(improvedreservebuffer)withwhatweshowtobeasharpdeclineinproxyNPLratiossuggestsbigbankswilllikelyseemuchlowercreditcoststhisyear.In2018,weexpectBig4bankstopost12.2%profitgrowthvs4.2%in2017andconsensus7.7%growthestimates,evenafterfactoringinthe2.5%reservetoloanthresholdrequirement.■Divergencecontinues.Wenotethatpartofbigbanks'strongercoreearningsisattheexpenseofJointStockBanks(JSBs)withthegovernmentcrackdownonshadowbanking.Wehaveseenthefirstroundofimpactonbanksin2017(divergingNIM,WMfeedeclineandslowerassetgrowthoncutbackinnon-loanassets)andasthisadjustmentcontinuesinto2018,weexpectbanks’assetgrowthtoremainslowalongwithmacroslowdowninto2H18.Importantly,theimpactonbankscouldbroadenoncesomeoff-BSwealthmanagementproducts(WMP)arebroughttoon-BS,whichwillfurtherconstrainmostJSB'scapacitytogrow,giventheirLDRsarealreadyabove90%andCET-1below9%.■OVERWEIGHTbigbanks;preferCMBamongJSBs.WelikebigbanksforbetterP&Lupside,strongbalancesheetsupport,andbenefitfromrelievedsystematicrisksasChina'sfinancialsystemcontinuestode-leverage.WeassumecoverageonCCB,ICBC,BOC,ABCandPSBCwithOUTPERFORMratingswhileweassumecoverageonMSBandCiticsBankwithUNDERPERFORMratings.AmongJSBs,wepreferCMBandweassumecoverageonCMB,BoCom,CEBandPABwithNEUTRALratings.Keyrisks:(1)worse-than-expectedassetqualitydeterioration;(2)unexpectedcapitalraising,shouldnewWMPguidelinesleadtolargerimpactoncapital.29.5%16.4%11.8%6.9%0.3%0.5%4.7%10.9%10.3%10.0%0%10%20%30%40%20112012201320142015201620172018E2019E2020EChinaBanksSector'snetprofitgrowth19April2018ChinaBanksSector2FocuschartsFigure2:EPSgrowthwillbemostlydrivenbybigbanksandCMBFigure3:NIMimprovementwillcontinuetofavourlargebanksSource:theBLOOMBERGPROFESSIONALTMservice,CreditSuisseresearchSource:theBLOOMBERGPROFESSIONALTMservice,CreditSuisseestimatesFigure4:Weestimate3-4bpofNIMimprovementin2018forthesectorFigure5:Weestimatesector'screditcostwillfurtherdeclinein2018Source:Companydata,CreditSuisseestimatesSource:Companydata,CreditSuisseestimatesFigure6:Creditcostwillcontinuetoimproveacrossallbanksin2018Figure7:…whilemostbankswillmeet2.5%reservetoloanthresholdby2018Source:Companydata,CreditSuisseestimatesSource:Companydata,CreditSuisseestimates16%15%13%12%12%11%8%6%3%-3%-10%-15%-10%-5%0%5%10%15%20%CMBPSBCICBCABCCCBBOCBCOMPABMSBCITICCEB2018EEPSgrowth9.28.27.86.65.74.71.00.70.30.3(5.5)-8-6-4-20246810CCBABCPSBCICBCBOCMSBCMBBCOMCEBCITICPABChangeof2018NIM(bps)2.45%2.67%2.54%2.58%2.48%2.13%2.01%2.05%2.09%2.13%1.90%2.00%2.10%2.20%2.30%2.40%2.50%2.60%2.70%2.80%20112012201320142015201620172018E2019E2020EChinaBanksSector'sNIM5654599313213712010210110302040608010012014016020112012201320142015201620172018E2019E2020EChinaBanksSector'screditcost(bps)647081911009110312012217616525759616578798490102113134141218-50100150200250300PSBCBCOMBOCICBCCCBABCCEBAggrMSBCMBCITICPAB2017creditcost2018Ecreditcost(bps)4.2%3.7%2.8%2.7%2.6%2.6%2.5%2.5%2.5%2.4%2.3%0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%CMBABCCITICPABMSBCCBCEBICBCPSBCBOCBCOM2018Ereservetoloanratio19April2018ChinaBanksSector3Positionformoreupside;preferbigbanksMoreearningsupsideforlargebanksWebelieveweareatthepointofthecyclewherethereshouldbemoreP&LupsideforlargeChinesebanksthroughbettercoreearningsandlowercreditcosts.Oncoreearnings,netinterestmarginimprovementhasbeenstrongerthanexpectedsince4Q17,partlyattheexpenseofJSBs.Webelievethetrendissettocontinuewithbothloanyieldsandmarketratesstilltrendinghigher,partlyfuelledbymoreshadowbankingcrackdownandshiftincreditdemandtobankloans.Oncreditcosts,assetqualityimprovementin2017didnotresultinlowercreditcostsforlargebanksastheyusedstronger-than-expectedcoreprofitgrowthin2H17toraisereservebuffer.Withstrongerbufferandfurtherimprovementinassetquality,weestimatebigbankstoseelowercreditcostof76bp(vs91bpin2017)whilemeetingthe2.5%reservetoloanthresholdbyend-2018.For2018,weexpectBig4banks