Maintain “BUY” rating on ramp-up of corporate banking business
Ping An Bank (Ping An) started retail transformation in 2016 and has entered a new phase backed by its strategy of pursuing “tech-driven innovation, retail breakthroughs and selective corporate”. The bank has achieved remarkable results - Fintech is empowering business, retail segment has reached new highs, and corporate banking is gaining traction. We expect corporate banking to extend strong performance with technology and support from the group level, making Ping An a more balanced new type of bank. We reiterate our recommendation for Ping An Bank, projecting its NPAT to grow at 15.6%/16.8%/17.2% in 2019E-2021E, EPS to be RMB1.67/1.95/2.29, and target price to be RMB16.53-17.97. Maintain BUY.
Group efforts facilitate a clear corporate banking strategy
Ping An focuses on corporate business to form synergies and leverage the growth of industry internet. A sound management mechanism is in place to support its corporate banking strategy. The segment adopts a “3+2+1” strategy, ie, to strengthen the “3 pillars” – industry bank, transaction bank and integrated finance, to focus on 2 customer bases – strategic and small & micro customers, and to stick to “one lifeline” – asset quality. Industry banking will steer the development of corporate banking, and transaction banking, with low risk and less capital, will be a key gateway to industry internet. Integrated finance marks a unique advantage, while focusing on strategic and SME clients reflects the bank’s strength. Strong figures on corporate loans, deposits and non-interest income in 1H19 reflects the success of its corporate banking strategy.
Retail-oriented positioning unchanged, fee income a new contributor
Despite its emphasis on corporate banking, Ping An’s retail-oriented positioning is unchanged, in line with group strategy. Retail transformation is at an advanced stage of focusing on high-end customers with diversified financial needs, higher stickiness and sizeable wealth relative to base customers. High net worth customer base grew fast in 1H19 and enjoys large upside with core insurance clients of the group being diverted to the bank. As the bank’s retail loans made up of nearly 60% of its total loans at end-June, the focus of the retail business may shift from loan to wealth management and fee income, where it still lag behind established retail banks.
Fintech empowers business, a front runner in wealth management
Fintech, which has been applied in product innovation, customer service, business operation and risk control across the bank, is a key feature setting Ping An apart. Interbank business is adding more features to enhance transaction capabilities; wealth management subsidiary is on track to become a major fee income contributor. NPL deviation ratio has fallen consistently to 94%. NPL ratio of corporate loans reached a turning point, and is expected to outperform the industry average in retail space.
Capital replenishment and interest margin to generate opportunities
Potential early redemption of RMB26bn CBs could ease capital pressure. Interest margin may continue to beat given continuous repricing of interbank liabilities and deposit structure improvement. We forecast Ping An’s NPAT to grow at 15.6/16.8/17.2%, and 2019E BVPS to be 14.37x, implying 1.04x 2019E PB. Despite consensus PB estimate of 0.76x for joint stock banks, we believe it deserves a 2019E PB of 1.15-1.25x. Maintain TP of RMB16.53-17.97.
Risks: worse-than-expected economic slowdown and asset quality deterioration.
Full Chinese report: 【华泰金融沈娟团队】零售对公双驱动，科技引领新银行——平安银行（000001）【证券研究报告】
👤SHEN Juan Chief Analyst
👤TAO Shengyu，CFA Non-banking
👤JIANG Zhaopeng Banking
👤WANG Ke Non-banking
This report is intended for clients of Huatai Securities Co., Ltd (hereinafter referred to as the Company) only. Any other person shall not be deemed as the client of the Company only by receiving his or her receipt of this report.
This report is based on information deemed reliable and publicly available by the Company, but the Company makes no guarantee as to the accuracy or completeness of such information. The opinions, assessments and projections contained herein only reflect the views and judgments at the issuance date. The Company may issue research reports that contain inconsistent views, assessments and projections with those set out herein at different times. Also, the prices, values and investment returns of the securities or investment instruments referred to herein may fluctuate. The Company makes no warrants that the information in this report be kept up to date. The information contained in this report may be modified without notice by the Company, and investors shall pay attention to such updates or modifications when necessary. This English report is a translated version of the published Chinese report. Please refer to the content of the original Chinese report in case of any discrepancy or inconsistency between the Chinese report and its English translation.
While every effort has been made by the Company to ensure the content contained herein is objective and impartial, the views, conclusions and recommendations in this report are for reference only and shall not be construed as a solicitation or an offer to buy or sell any securities referred to herein. Such views and recommendations do not take into account the specific investment objectives, financial positions and needs of individual investors and thus do not constitute private investment advices to clients at any time. Investors should give sufficient consideration to their own particular circumstances, and fully understand and use the contents of this report, which should not be seen as the sole factor to rely on in making investment decisions. The Company and the report’s authors shall under no circumstance be held liable for any consequences arising from the use of this report. Any form of written or verbal commitment to share the proceeds or losses of any securities investment shall be regarded as null and void.
The Company and the report’s authors have no legally prohibited interest in the securities or investment instruments referred to herein, to the best of their knowledge. The Company and/or its affiliated institutions may, to the extent permitted by applicable law, hold positions in or trade securities issued by companies mentioned herein, and may also provide or seek to provide services, such as services related to investment banking, financial consulting or financial products, to those companies. The Company's asset management, proprietary and other investment services departments may independently make investment decisions that are inconsistent with the opinions or recommendations expressed in this report.
The copyright of this report is exclusively owned by the Company. No organizations or individuals shall infringe the copyright of the Company by any means, such as duplicating, reproducing, publishing, quoting or redistributing any part of this report to any other person without the written consent of the Company. Where the company agrees to quote or distribute, it shall be used within the permitted scope with the source being marked as "Huatai Securities Research". Any reference, deletion or modification inconsistent with the original intention of this report shall not be made. The Company reserves the right to pursue legal actions against relevant infringement. All trademarks, service marks and marks used herein are trademarks, service marks and marks of the Company.
The Company is approved by the China Regulatory Commission under a qualification to carry out “securities investment consulting” business. Business license no. 91320000704041011J.
Wholly-owned subsidiary Huatai Financial Holdings (Hong Kong) Limited holds a license issued by the Securities and Futures Commission in Hong Kong to carry out “advising on securities” business. Business license no. AOK809.
© 2019 Huatai Securities Co., Ltd. All Rights Reserved.