NIM pressure lingers despite measures.
According to Maybank Kim Eng, as CNCB has heavy exposure to corporate deposits (81% of total deposits in Dec 2013), it is more vulnerable to price competition on deposits. As such, its NIM narrowed by 22bps QoQ to 2.37% in 1Q14. CNCB has shifted towards higher-yield reverse REPO and asset management schemes to minimize the NIM pressure during 1Q14.
Overall, we lower our NIM forecasts from 2.54-2.57% to 2.31-2.35% for 2014-15.
Room to improve net fees growth. CNCB has maintained strong growth momentum in net fees of 71.4% YoY in 1Q14. We believe this could be related to its niche at bond underwriting, guarantee and consultancy fees. CNCB indicated that it will co-operate with Alipay and Tenpay to issue virtual credit cards.
If CNCB is able to double its credit cards issued under this platform within 3 years, we estimate this will enhance its net fees by CNY2b by 2016. In view of CNCB’s gradual expansion in branch outlets, we raise our net fees CAGR forecast from 18.7% to 35.6% during 2013-16.
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