CHINA CONSTRUCTION BANK(939.HK)：REPORTED INCREASE IN 4Q24 EARNINGS-格隆汇

机构：中银国际
研究员：Eric HU/Emma XING

　　China Construction Bank’s (CCB) attributable net profit increased 0.8% YoY in 4Q24 and 0.3% YoY in 2024, against 0.1% YoY growth in 9M24. Its net interest income increased 0.2% YoY in 4Q24 as NIM stabilised. However, its net interest income still decreased 4.4% YoY in 2024, against negative YoY growth of 5.9% in 9M24. Its net fee and commission income continued to decrease in 2024 amid weak investment sentiments. As of end December 2024, its loans/deposits increased 8.5%/3.8% from end 2023. NPL ratio dropped in 4Q24 as asset quality improved. In our view, CCB will report positive earnings growth in 2025 as the pace of declining NIM will be slow in 2025 and solid asset quality will maintain in 2025. Valuation is attractive.
　　Factors for Rating
　　Asset quality improved in 4Q24. Its NPL ratio reached 1.34% at end December 2024, lower than 1.35% at end September 2024 and 1.37% at end December 2023. Its allowance to NPLs reached 233.6% in 2024, against 237.0% in 9M24 and 239.9% in 2023. It NPL ratio may drop to 1.33% in 2025.
　　NIM stabilised in 4Q24. As one of the largest banks in China, CCB has made more contributions to support the real economy, which resulted in lower NIM in 2024. However, its NIM stabilised in 4Q24. We noted that its NIM reached 1.51% in 2024 and 1.52% in 9M24, down 19bps and 18bps from 2023. We expect its NIM to drop 4bps in 2025.
　　Its net fee and commission income decreased in 2024. Its net fee and commission income decreased 9.3% YoY in 2024, against negative growth of 10.3% YoY in 9M24.
　　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
　　Its H shares are now trading at 0.46x 2025E P/B. Its dividend yield may reach 6.5% in 2025. Given its steady expansion in scale, solid asset quality and decent ROE, we believe the bank is undervalued. We expect its ROAE to reach 10.2% in 2025. We revised up our target price from HK$8.5 to HK$8.95, based on 0.6x 2025E P/B. Maintain BUY rating.