On back of higher non-interest income growth.
According to CCB International, Industrial and Commercial Bank of China (ICBC) reported FY13 net profit of RMB262.6b, up 10.2% YoY. Profit growth was driven by strong non-interest income growth of 21.2% YoY.Annualized ROE and ROA were 21.9% and 1.44%. The defensive nature of the bank should appeal to investors given rising uncertainty within China’s banking industry.
Delivers blunt assessment NIM and NPL situation. NIM was down 9bp as loan yields declined due to re-pricing after rate cuts in 2012. The NPL ratio climbed more than peers (up 9bp YoY), though it may have been distorted by write-offs and NPL-packed sales. ICBC, seeking a better recovery rate, seems more willing to resolve NPLs by itself than selling to AMCs.
Future earnings driver: restructuring. ICBC has weathered recent banking industry changes quite well and has taken strides to restructure its business, including: (1) shifting more resources to MSE (RMB1.87t, 20.4% of domestic loans) and personal loans (up 19.3% YoY vs. 11.7% YoY of domestic loans); (2) boosting fee income to achieve stable revenue; and (3) imposing stringent cost controls on funding and operating costs.
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