CHINA EVERBRIGHT BANK(6818.HK)：NET PROFIT INCREASED IN 9M24-格隆汇

机构：中银国际
研究员：Eric HU/Emma XING

China Everbright Bank’s (CEB) attributable net profit increased 2.3% YoY in 3Q24 and 1.9% YoY in 9M24, against 1.7% YoY growth in 1H24. Its net interest income dropped 11% YoY in 9M24, against negative YoY growths of 12.1% in 1H24 and 5.4% in 2023. Its net fee and commission income dropped 20.6% YoY in 9M24, against negative growths of 21.7% YoY in 1H24 and 9.3% YoY in 2023. As of end-September 2024, its loans increased 3.1% from end-2023 while its deposits decreased 1.8% from end-2023. CEB’s asset quality remained stable in 9M24 as NPL ratio was unchanged from 1H24. Looking ahead, we expect CEB to report positive growth in net profit in 4Q24 as the declining pace of NIM will be slow in 4Q24. Valuation remains cheap. Maintain BUY rating.
Key
Factors for Rating
Asset quality remained stable in 9M24. Its NPL ratio was 1.25% at end- September 2024, unchanged from end-June 2024 and end-December 2023. Its allowance to NPLs was 170.73% in 9M24, against 172.45% in 1H24 and 181.27% in 2023. We expect its NPL ratio to stay at 1.25% in 2024.
Net interest income dropped in 9M24. Its net interest income decreased 8.8% YoY in 3Q24 and 11% YoY in 9M24, against negative growths of 12.1% YoY in 1H24 and 5.4% YoY in 2023. As China’s banks lowered deposit rates as well as RRR and outstanding personal mortgage loans rates reduced, CEB’s NIM pressure may have alleviated in 3Q24. We expect its NIM to remain largely stable in 4Q24.
Net fee and commission income decreased in 9M24. Its net fee and commission income decreased 20.6% YoY in 9M24. As a result, the proportion of net fee and commission income in total operating income reached 14.8% in 9M24, against 17% in 9M23.
Key Risks for Rating
The bank might be under strong pressure to provide more support to the real economy if China’s economy slows down significantly.
Valuation
Its H shares are now trading at 0.3x 2024E P/B, which remains quite cheap. We expect its ROAE to reach 7.8% in 2024, lower than sector’s average level. Its 2024E dividend yield will be around 7.3%. We slightly revised down our target price from HK$3.20 to HK$3.19, based on about 0.35x 2024E P/B. Maintain BUY rating.