ICBC(1398.HK)：REPORTED POSITIVE EARNINGS GROWTH IN 4Q24-格隆汇

机构：中银国际
研究员：Eric HU/Emma XING

　　Industrial and Commercial Bank of China’s (ICBC) attributable net profit increased 1.6% YoY in 4Q24 and 0.5% YoY in 2024, against 0.1% YoY growth in 9M24. As one of the biggest banks in China, its scale increased steadily. As of end December 2024, its loans/deposits increased 8.8%/3.9% from end 2023. Its net interest income increased 4.7% YoY in 4Q24 as NIM was quite stable, against negative growth of 4.9% YoY in 9M24. Its NPL ratio dropped in 4Q24, as asset quality remained solid. ICBC maintained strict NPL recognition and its allowance to NPLs ratio increased slightly in 2024. Its H shares are now trading at below 0.5x 2024E P/B, which, in our view, is undervalued. Looking ahead, we believe ICBC will report positive growth in earnings amid solid asset quality in 2025. Maintained BUY rating.
　　Key Factors for Rating
　　Solid asset quality maintained in 4Q24. Its NPL ratio reached 1.34% at end December 2024, lower than 1.35% at end September 2024 and 1.36% at end December 2023. ICBC maintained strict NPL recognition policy in 2024. Its allowance to NPLs reached 214.9% at end December 2024, against 220% at end September 2024 and 214% at end December 2023. We expect its NPL ratio to stay at 1.34% in 2025.
　　Net interest margin (NIM) was stable in 4Q24. As ICBC strengthened its financial support to the real economy and small and medium sized enterprises, its NIM declined in 2024. However, its NIM stabilised in 3Q24 and 4Q24. Its NIM reached 1.42% in 2024 and 1.43% in 9M24, down 19bps and 18bps from 2023. We expect its NIM to drop 3bps in 2025.
　　Fee and commission income dropped in 2024. Its net fee and commission income decreased 8.3% YoY in 2024, against negative YoY growth of 9.0% in 2023, mainly due to volatile equity markets.
　　Key Risks to Rating
　　The bank might be under strong pressure to provide more support to the real economy if China’s economy slows down significantly.
　　Valuation
　　We expect its ROAE to reach 9.5% in 2025. Its H shares are now trading at 0.47x 2025E P/B. Considering its solid asset quality, decent ROAE and around 6.1% dividend yield, we believe the bank is undervalued. We increased our target price from HK$6.81 to HK$7.16, based on about 0.6x 2025E P/B.