外文报告：CCB-农业银行(01288)Slight beat in profit growth on NIM recovery and lower credit costs-121028

China/Hong Kong
China Banks




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Agricultural Bank of China (1288 HK)
28 October 2012
Slight beat in profit growth on NIM
recovery and lower credit costs
Company Rating:

Outperform
(maintained)
? 9M12 net profit beats consensus estimate. Agricultural
Bank of China (ABC) reported 9M12 net profit of RMB120.1b,
up 19.2% YoY and 4.6% ahead of the consensus estimate.
The stabilizing trend for NIM and benign credit costs were the
main growth drivers. Annualized ROE and ROA were 23.03%
and 1.30%, respectively, in 3Q12.
? Quarter-on-quarter expansion in NIM. ABC reported 9M12
NIM of 2.82%. We estimate 3Q12 NIM to have been 2.76%,
up 3bp QoQ. The downward re-pricing of deposits was a key
factor behind the stable NIM trend, in our view. We expect
this trend to remain intact until 1Q13 when NIM is likely to
decline due to the downward re-pricing of loans.
? Mild improvement in asset quality. ABC’s NPL balance
declined 0.8% QoQ and the NPL ratio ended the quarter at
1.34%, down 5bp QoQ. The bank’s NPL balance and ratio
has now seen “double declines” in all three quarters this year.
Coverage ratio was 311% while the LLR/loan ratio edged up
7bp QoQ to 4.18%. Annualized credit cost was 70bp for
3Q12. Based on ABC’s stable NPL trend and robust
provisioning levels, we believe the bank will maintain its
current provisioning policy over 4Q12.
? Steady income fee growth. Net fees amounted to
RMB58,110m over 9M12, up 6.0% YoY. Due to the lack of
further disclosure, we are left to assume growth was mainly
derived from steady growth in the bank’s credit card,
electronic banking and agency businesses.
? Encouraging capital expansion. Tier-1 CAR ended 3Q12 at
9.76%, up 11bp QoQ. ABC’s CAR ended the quarter at
12.07%, up 5bp QoQ. Although it’s likely ABC still has the
lowest Tier-1 CAR among the big-four banks, this mild
expansion is an encouraging sign as the bank prepares for
the implementation of Basel III next year.

Forecast and valuation
Year to 31 December 2010 2011 2012F 2013F 2014F
Net profit (RMB m) 94,873 121,927 147,459 165,055 196,727
EPS (RMB) 0.33 0.38 0.45 0.51 0.61
YoY change (%) 32.3 13.5 20.9 11.9 19.2
P/E (x) 7.9 7.0 5.8 5.2 4.3
Yield (%) 6.6 5.0 6.1 6.8 8.1
BVPS (RMB) 1.67 2.00 2.35 2.74 3.20
P/B (x) 1.57 1.31 1.12 0.96 0.82
ROAE (%) 21.4 20.5 20.9 20.0 20.4
Source: CCBIS estimates


Price: HK$3.24
Target: HK$3.70
(maintained)

Trading data
52-week range HK$2.72/3.98
Market capitalization (b) HK$1,000/US$129
Shares outstanding (m) (H-share) 30,739 (H-share)
Free float (%) 81.9
3M average daily T/O (m share) 123.8
3M average daily T/O (US$m) 48.7
Expected return (%) – 1 year 14.2
Closing price on 26 October 2012
Stock price vs. HSCEI
2.6
2.8
3.0
3.2
3.4
3.6
3.8
4.0
27-Oct-11 08-Jan-12 21-Mar-12 02-Jun-12 14-Aug-12 26-Oct-12
HK$
ABC HSCEI (reba sed)

Source: Bloomberg








Nan Sheng, CFA
(852) 2533 2400
nansheng@http://wendang.chazidian.com

Kin Li
(852) 2533 2410
likinchung@http://wendang.chazidian.com