Ping An Bank profits up 45% in Q2, but NIM contraction to continue

Whilst fee income and loan growth is robust, capital position weakened.

Ping An Bank’s net profit growth accelerated 45% in Q2 compared to the same period last year, mainly thanks to lower credit costs, reports OCBC Investment Research.

Pre-provisions operating profit (PPOP) growth moderated to 6% YoY and extended the 10% growth in Q1, driven by strong fee income growth, loan growth and better cost control. 

Fee income growth and loan growth remained robust, rising 20% and 15% during the quarter, respectively. The bank’s asset quality also improved with non-performing loan (NPL) ratio edging down 2bps at 1.08% in Q2, 

However, net interest margin (NIM) will continue to be in doldrums throughout 2021. In Q2, NIM dropped 8bps to 2.79% from Q1 due to lower loan yield. 

However, whilst NIM contraction will extend throughout the year, OCBC Investment Research expects that NIM pressure could be eased with lower funding cost.

Capital position also weakened during the quarter, and the possibility of an external capital raising can’t also be ruled out, OCBC Investment Research warned in the report.

“Whilst PAB should be well positioned to grow its wealth management business by leveraging on Ping An Group’s advantage to provide a full scale of products, we believe the possibility of external capital raising cannot be ruled out,” the report said.

Overall, PAB reportedly made solid development in retail business with an overall number of retail clients & retail asset under management (AUM) rising 3% & 6%in Q2 compared to the previous quarter