Nomura: CCB Financial Data Outperforms ICBC; Expects ICBC to Catch up in Future
Nomura, in its report, said ICBC (01398.HK) +0.020 (+0.469%)
Short selling $212.30M; Ratio 24.361% and CCB (00939.HK) -0.020 (-0.382%) Short selling $174.98M; Ratio 14.000% are the broker's two fundamental picks within China banks, but CCB has outperformed ICBC since 19 May, so the broker saw better upside potential for ICBC.
Nomura said CCB’s key financial ratios looked better than ICBC’s by 1Q16, in terms of margin, asset quality and capital levels. For margin, China banks all faced ongoing pressure but CCB still recorded better NIM (2.4%) compared to ICBC's 2.28%. On NPLs, banks also saw pressure rising. ICBC’s NPL ratio at 1.66% is marginally higher, compared to CCB’s at 1.63% by 1Q16, but its special mention loan (SML) ratio at 4.36% in 2015 was well above that of CCB at 2.89%. On provisions, ICBC’s provision coverage ratio has dropped continuously to 141%, lower than that of CCB at 152% by 1Q16. On capital, ICBC’s CET1 of 12.9% is also lower than that of CCB at 13.5% by 1Q16, though both were well above the system average of 11% as per CBRC.
Nomura believed the CET1 gap between ICBC and CCB could narrow, with both seeing their CET1 dropping to 11% by 2018F, but still above the minimum requirement by CBRC. Both ICBC and CCB do not have capital-raising needs in the coming years. The broker noted their payout ratio has dropped from 35% in 2012-2013 to 30% in 2015, and it expected a cut to 25% or even 20% for both banks future.
Nomura, in its report, said ICBC (01398.HK) +0.020 (+0.469%)
Short selling $212.30M; Ratio 24.361% and CCB (00939.HK) -0.020 (-0.382%) Short selling $174.98M; Ratio 14.000% are the broker's two fundamental picks within China banks, but CCB has outperformed ICBC since 19 May, so the broker saw better upside potential for ICBC.Nomura said CCB’s key financial ratios looked better than ICBC’s by 1Q16, in terms of margin, asset quality and capital levels. For margin, China banks all faced ongoing pressure but CCB still recorded better NIM (2.4%) compared to ICBC's 2.28%. On NPLs, banks also saw pressure rising. ICBC’s NPL ratio at 1.66% is marginally higher, compared to CCB’s at 1.63% by 1Q16, but its special mention loan (SML) ratio at 4.36% in 2015 was well above that of CCB at 2.89%. On provisions, ICBC’s provision coverage ratio has dropped continuously to 141%, lower than that of CCB at 152% by 1Q16. On capital, ICBC’s CET1 of 12.9% is also lower than that of CCB at 13.5% by 1Q16, though both were well above the system average of 11% as per CBRC.
Nomura believed the CET1 gap between ICBC and CCB could narrow, with both seeing their CET1 dropping to 11% by 2018F, but still above the minimum requirement by CBRC. Both ICBC and CCB do not have capital-raising needs in the coming years. The broker noted their payout ratio has dropped from 35% in 2012-2013 to 30% in 2015, and it expected a cut to 25% or even 20% for both banks future.
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