Dual engines drive growth—Ping An Bank (000001 SZ)

来源：华泰金融研究全新平台

Core View 

1

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.

2

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.

3

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. 

4

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. 

5

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.

Report

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】

Analyst

👤SHEN Juan    Chief Analyst 

    License: S0570514040002

👤TAO Shengyu，CFA  Non-banking

    License: S0570518050002

👤JIANG Zhaopeng  Banking

    License: S0570118030059

👤WANG Ke    Non-banking

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