Ping An Bank Co Ltd – Robust deposit growth and improving asset quality June 24, 2019 1373

Ping An Bank Co., Ltd. provides commercial banking services in China. The Company offers deposit services, loan services, bill services, settlement services, credit card services, international banking, online banking, and other related services.

 

1Q19 Results Overview

  • Ping An Bank (PAB) reported 1Q19 net profits of Rmb7.4bn, up 13% YoY.
  • Earnings were driven by rapid growth 13% QoQ in retail deposits. Net Interest Margin (NIM) improved 3bps QoQ to 2.53% driven by declining interbank funding costs.
  • NPL ratio reported 1.73% contracted by 2bps QoQ. However, the rise in NPL % of non-collateralized consumption loans, a source of concern on asset quality going forward.
  • Overall, we consider 1Q19’s result positive. Mainly because of company’s robust deposit growth and improving asset quality.

 

Positives

+ NIM up slightly by 3bps QoQ but surged 28bps YoY. PAB’s NIM expansion was mainly contributed by a decline interbank funding costs by 9bps QoQ (note that industry 3M-SHIBOR fell 17bps QoQ). However, we expect NIM momentum to weaken due to pressure to lower interest rate and limited upside in further interbank funding cost savings.

+ Loan to deposit ratio (LDR) up 173bps YoY to 88.85% but slightly down 409bps QoQ. Retail deposits went up by 13% QoQ (vs corporate deposits of 6% QoQ). With core capital ratio increased 21bps QoQ to 8.75%, PAB have more room for giving loans.

+ Improving asset quality and NPL coverage ratio. The NPL ratio reported 1.73% contracted by 2bps QoQ; at the same time, NPL coverage ratio edged up by 15ppt QoQ to 171% at end 1Q19. Under the background that regulators reduce the regulatory requirement of provision coverage ratio to 120%-150%, the company has enough liquidity room for future.

+ Non-interest income grew 19% QoQ and 25% YoY. Net fees grew 26% QoQ and 11% YoY, mainly driven by the fast expansion of credit card transaction amount. Non-fee income grew 188% YoY due to investment income (+518% YoY), and management attributed this to the accounting changes which classified part of the net interest income into investment income since 3Q18.

 

Negatives

– Un-collateralised personal loan NPL ratio continues to climb. NPL ratio for credit card loan and Xin Yi Dai (XYD, un-collateralised personal loans) went up by 2bps and 14bps QoQ respectively, but from a low base.

 

Recommendation

Overall, we consider 1Q19’s result positive. Mainly because of company’s robust deposit growth and improving asset quality.

 

Technicals:

Red line = 200 periods moving average

Blue line = 50 periods moving average

Green line  = 22 periods moving average

 

Support 1: 11.99        Resistance 1: 14.74

Support 2: 9.17

Ping An Bank’s bullish spike last week is the stock reflecting its desire for a strong bullish rise and the technical factors presented shows that Ping An Bank will continue to rise higher in the long run.   

  • 6 years of bullish accumulation into the ascending triangle is the key bullish formation that confirms the future bull run.
  • Prices have been trending above 3 key major moving averages.
  • The highs have been tested for 4 times, and the resistance may get weaker as resistance being tested more than 3 times without breaking new lows shows that the price may want to break new high.
  • Price has rejected the 50% Fibonacci retracement level, followed by a strong bullish run.
  • Stochastic crosses near the oversold zone and the following 2 period strong bullish movement proves that the bullish momentum is strong.

Important Information

This report is prepared and/or distributed by Phillip Securities Research Pte Ltd ("Phillip Securities Research"), which is a holder of a financial adviser’s licence under the Financial Advisers Act, Chapter 110 in Singapore.

By receiving or reading this report, you agree to be bound by the terms and limitations set out below. Any failure to comply with these terms and limitations may constitute a violation of law. This report has been provided to you for personal use only and shall not be reproduced, distributed or published by you in whole or in part, for any purpose. If you have received this report by mistake, please delete or destroy it, and notify the sender immediately.

The information and any analysis, forecasts, projections, expectations and opinions (collectively, the “Research”) contained in this report has been obtained from public sources which Phillip Securities Research believes to be reliable. However, Phillip Securities Research does not make any representation or warranty, express or implied that such information or Research is accurate, complete or appropriate or should be relied upon as such. Any such information or Research contained in this report is subject to change, and Phillip Securities Research shall not have any responsibility to maintain or update the information or Research made available or to supply any corrections, updates or releases in connection therewith.

Any opinions, forecasts, assumptions, estimates, valuations and prices contained in this report are as of the date indicated and are subject to change at any time without prior notice. Past performance of any product referred to in this report is not indicative of future results.

This report does not constitute, and should not be used as a substitute for, tax, legal or investment advice. This report should not be relied upon exclusively or as authoritative, without further being subject to the recipient’s own independent verification and exercise of judgment. The fact that this report has been made available constitutes neither a recommendation to enter into a particular transaction, nor a representation that any product described in this report is suitable or appropriate for the recipient. Recipients should be aware that many of the products, which may be described in this report involve significant risks and may not be suitable for all investors, and that any decision to enter into transactions involving such products should not be made, unless all such risks are understood and an independent determination has been made that such transactions would be appropriate. Any discussion of the risks contained herein with respect to any product should not be considered to be a disclosure of all risks or a complete discussion of such risks.

Nothing in this report shall be construed to be an offer or solicitation for the purchase or sale of any product. Any decision to purchase any product mentioned in this report should take into account existing public information, including any registered prospectus in respect of such product.

Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may provide an array of financial services to a large number of corporations in Singapore and worldwide, including but not limited to commercial / investment banking activities (including sponsorship, financial advisory or underwriting activities), brokerage or securities trading activities. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may have participated in or invested in transactions with the issuer(s) of the securities mentioned in this report, and may have performed services for or solicited business from such issuers. Additionally, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may have provided advice or investment services to such companies and investments or related investments, as may be mentioned in this report.

Phillip Securities Research or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report may, from time to time maintain a long or short position in securities referred to herein, or in related futures or options, purchase or sell, make a market in, or engage in any other transaction involving such securities, and earn brokerage or other compensation in respect of the foregoing. Investments will be denominated in various currencies including US dollars and Euro and thus will be subject to any fluctuation in exchange rates between US dollars and Euro or foreign currencies and the currency of your own jurisdiction. Such fluctuations may have an adverse effect on the value, price or income return of the investment.

To the extent permitted by law, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may at any time engage in any of the above activities as set out above or otherwise hold an interest, whether material or not, in respect of companies and investments or related investments, which may be mentioned in this report. Accordingly, information may be available to Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, which is not reflected in this report, and Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may, to the extent permitted by law, have acted upon or used the information prior to or immediately following its publication. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited its officers, directors, employees or persons involved in the issuance of this report, may have issued other material that is inconsistent with, or reach different conclusions from, the contents of this report.

The information, tools and material presented herein are not directed, intended for distribution to or use by, any person or entity in any jurisdiction or country where such distribution, publication, availability or use would be contrary to the applicable law or regulation or which would subject Phillip Securities Research to any registration or licensing or other requirement, or penalty for contravention of such requirements within such jurisdiction.

This report is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The products mentioned in this report may not be suitable for all investors and a person receiving or reading this report should seek advice from a professional and financial adviser regarding the legal, business, financial, tax and other aspects including the suitability of such products, taking into account the specific investment objectives, financial situation or particular needs of that person, before making a commitment to invest in any of such products.

This report is not intended for distribution, publication to or use by any person in any jurisdiction outside of Singapore or any other jurisdiction as Phillip Securities Research may determine in its absolute discretion.

IMPORTANT DISCLOSURES FOR INCLUDED RESEARCH ANALYSES OR REPORTS OF FOREIGN RESEARCH HOUSE

Where the report contains research analyses or reports from a foreign research house, please note:

  1. recipients of the analyses or reports are to contact Phillip Securities Research (and not the relevant foreign research house) in Singapore at 250 North Bridge Road, #06-00 Raffles City Tower, Singapore 179101, telephone number +65 6533 6001, in respect of any matters arising from, or in connection with, the analyses or reports; and
  2. to the extent that the analyses or reports are delivered to and intended to be received by any person in Singapore who is not an accredited investor, expert investor or institutional investor, Phillip Securities Research accepts legal responsibility for the contents of the analyses or reports.

Get access to all the latest market news, reports, technical analysis
by signing up for a free account today!