Bank of China's net profit up 10% to CNY106.4b in 9M12

But profit in 3Q12 was flat at CNY34.8b.

According to Maybank Kim Eng, 3Q12 net profit was CNY34.8b, at top end of market consensus, and better than our estimates (CNY32.0b). 3Q12 net profit was flat QoQ, while market and our estimates expected mid to high single digit QoQ decline.

Here's more from Maybank Kim Eng:

9M12 net profit reached 80% of our old FY12 estimates. 9M12 net profit was CNY106.4b, up 10% YoY, and reached 80% of our old FY12 estimates (9M11 net profit reached 78% of FY11 figure). Stripping out the Lehman Brothers related write back in 9M11, core profit rose by 13.5% YoY. Key positive surprises came from net interest margin (NIM) and asset qualities.

3Q12 NIM widened QoQ, a positive surprise. 3Q12 net interest income rose by 3% QoQ, despite the 1% QoQ fall in asset size. According to our estimates,

3Q12 NIM widened by 7bps QoQ, while market and we expected a decline. It seems that the effect of PBOC’s rate cut was less severe than expected, and we also believe that BOC’s foreign currency business also helped NIM to stand firm.

3Q12 provisions rose QoQ, but still lower than expected. 3Q12 loan provision rose by 22% QoQ from the low base in 2Q12, but still lower than that in 1Q12.

For aggregate figures, 9M12 loan provisions fell by 18% YoY, and the provision amount (CNY13.7b) reached only 51% of our old FY12 estimates. We believe that our estimates were very conservative.

Asset qualities trends were also better than expected. NPL amount rose slightly by 1% QoQ, while NPL ratio fell during 3Q12 (Jun12: 0.94%, Sept12: 0.93%). Our old projection of 20% full year NPL growth should be conservative enough.

CAR above CBRC requirement, no fund raising risk. Sept12 core and total CAR reached 10.4/13.2%, higher than the 10.2/13.0% at Jun12. For systematically important bank, CBRC’s requirements on core/total CAR are 9.5/11.5%. There would be no fund raising risk for BOC, and the bank should be able to keep its 35% dividend payout ratio.