But underlying trends remain good.
According to Maybank Kim Eng, CNCB’s 3Q12 net profit was CNY7.9b, down 27% QoQ, and below market consensus and our estimates. 9M12 net profit rose by 12% YoY to CNY27.2b, and reached only 80/78% of market consensus/our old FY12 profit estimates.
Here's more from Maybank Kim Eng:
NIM narrowed, but NII rose QoQ. Under our estimates, CNCB’s 3Q12 net interest margin (NIM) was 267bps, down 9bps QoQ. We believe that the QoQ fall in NIM was widely expected by the market. Despite the QoQ fall in NIM, CNCB’s net interest income still managed to rise marginally (on QoQ basis) during the past 3 quarters.
CNCB’s pre-provision operating profit was in fact better than expected, as 9M12 PPOP rose by 19% YoY to CNY43.1b, and reached 79% of our old FY12 estimates (Of note, 9M11 PPOP reached 74% of FY11 PPOP). The key difference between the actual results and our estimates lied in loan provision charges.
CNCB’s provision charges jumped significantly in 3Q12, and the CNY4b provision charges was a record quarterly high. CNCB did not provide exact reasons, just stated that the bank booked loan impairment losses based on prudent principle. 9M12 provision charges now reached CNY6.5b, and our old FY12 estimates of CNY7.5b seems not adequate, therefore we revised up our provision charges estimates for FY12-14E.
NPL amount was flat during 3Q12. Despite the jump in provision charges, asset qualities remained stable. Sept12 NPL amount was flat QoQ, and Sept12 NPL ratio was 0.60%, lower than the 0.61% at Jun12. YTD NPL rose by 10% (incurred in 1H12), but we believe that our 35% estimate for FY12 NPL growth is adequate.
Capital position remained intact, CAR likely remain highest among small banks. Core and total CAR further improved during 3Q12, to 10.1/13.7%, and were well above CBRC’s requirement of 8.5/11.5%. Fund raising need is minimal, and CNCB’s CAR is likely to remain the highest among small banks (except CRCB).
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