China Construction Bank (601939): Consolidation of retail advantages, steady endogenous growth

Key points of investment: The ROE of CCB is higher than that of other conventional banks, and it is estimated that the copyright should be a premium.

And the two core profit indicators of asset quality and interest margin have advantages.

Covered for the first time, giving a “preliminary market” rating.

Loan issuance implements retail priority guidance.

As a regular big bank, China Construction Bank has a long history of launching retail business, and its choice is relatively relative to risks. The retail business is ranked first.

At the end of the second quarter of 2019, CCB mortgages had a credit card market share of 18.

25%, 9.

35%.

Among the two main types of retail asset business, CCB maintained its market share number one.

Benefiting from credit risk, the proportion of mortgage loans is high, and CCB’s retail NPL ratio at the end of the second quarter of 2019 was only 0.

46%; Budget credit cards are 1 at the end of the second quarter of 2019.

21% is also better than its peers.

Based on the advantages 北京夜网 of traditional infrastructure construction, the company has implemented an inclusive financial strategy.

Infrastructure loans are a traditional advantage of CCB, accounting for 52 at the end of the second quarter of 2019.

71%.

In addition, the NPL ratio of infrastructure loans performed better. The NPL ratio at the end of the second quarter of 20191.

02%, with the non-performing ratio of 2.
.

The quality of 50% of the underlying assets is much better.

Inclusive Finance, as one of the three major strategies of China Construction Bank, started early and its customer structure has sunk.

The inclusive financial loans of the two state-owned construction banks rank first among the big banks in terms of the scale and proportion of their loans, and the average per household amounts are relatively large.

Inclusive 深圳桑拿网 financial loans accounted for 5 at the end of the second quarter of 2019.

73%, 67 per household.

800,000 yuan.

The interest margin is the core profit driver, and provision for marginal pressure measures.

With the optimization of the retail loan structure of China Construction Bank, the personal loan yield has exceeded the interest rate on corporate loans since 2017.

Since then, the gap has gradually widened, and personal loan yields in the first half of 20194.

73%, higher than 34BP.

Therefore, although the cost of deposits has risen, the deposit-loan gap has remained stable, allowing CCB’s interest margin to shift.

Another factor that affects profitability is provisioning. The provision coverage ratio of CCB’s stock provisioning level is in the upper and middle positions among major banks; the marginal provisioning level of credit costs has declined marginally in the first half of 2019.

We think this shows that with the improvement of credit risk, the impact of provision pressure on earnings has eased.

Endogenous growth is stable and the capital level is sufficient.

As a global system, CCB expects that banks will be subject to total loss absorption capacity (TLAC) in the future. The ratio of TLAC to risk assets needs to be achieved in stages at the beginning of 2025/2028.

Our calculations show that CCB has the smallest gap in external financing of TLAC among the four major banks, and the marginal cost it bears is also smaller.

The company’s molecular-end ROE and denominator-end RWA have advantages, and their endogenous capital replenishment capabilities are stronger.

Investment suggestion: CCB’s indicators are at the upstream level, and ROE is higher than other conventional big banks. We believe that the estimated ownership should be a premium.

The retail business experienced structural optimization, increased allocation, and maintained an outstanding level of asset quality.

We expect the company’s attributable net profit growth rate to be 5 to 20 years from 2019-2021.
9%, 6.
9%, 7.

6%, EPS are 1 respectively.

06, 1.

14.1.

22 yuan.

According to DDM, the PB-ROE model gives CCB a final reasonable value range of 8.

26-8.

34 yuan, corresponding to 2019 PB estimate is 0.

99-1.

00 times, 2019 PE is estimated to be 7.

8-7.

9 times, giving the expected market rating.

Risk warning: the company’s ability to repay its debts has declined, and the quality of its assets has deteriorated severely; major changes have occurred in financial regulatory policies.