Industrial Bank (601166): The Truth and Misunderstanding of Profit Decline

Industrial Bank (601166): The Truth and Misunderstanding of Profit Decline

杭州夜生活网This report reads: The Industrial Bank ‘s interim profit growth was higher than expected due to the increase in provisioning by leading banks in all of their loans that were overdue for more than 60 days.

If normal release of net profit growth rate is available from now 6.

6% increase by 4.

9 to 11 pieces.


Investment Highlights: Investment Recommendations: Maintain forecast for 19/20/21 net profit growth.

01% / 10.

01% / 11.

04%, corresponding to EPS 3.



74 yuan, BVPS23.



69 yuan, the current price corresponds to 5.



59 times PE, 0.



60 times PB.

Accounting adjustments do not change the value of the company, and continue to be optimistic about the investment value of Industrial Bank (the cheapest bank stock in the outstanding bank 北京养生会所 formation) with a target price of 25.

20 yuan, corresponding to 1 in 19 years.

07 times PB, 47% of current price space, increase holdings.

The trend of bad expectations seriously affects the logical context.

All loans that are overdue for more than 60 days are counted as non-performing → non-performing increase sharply → non-performing rate soaring → increase write-off → stabilize non-performing rate → increase provisioning → erosion of profits.

As a result of the increase in write-offs that would consume provisions, the increase in provisions did not lead to improvements in indicators of bad provision coverage and loan-to-loan ratios, but erosion of profits occurred.

There are two major misunderstandings in market interpretation.

The first is to explain the increase in bad generating script as a significant deterioration in the quality of real assets, but in fact the result of the bad identification policy tending to be serious; the second is that the increase in provisions does not bring a provision indicator (bad provision coverage ratio)And the loan-to-loan ratio) misunderstood as the real profit did not meet expectations, in fact, it actively managed accounting profits.

Restore the bad and profit of normal conditions.

If the original bad identification standard is maintained, the 19H1 bad production rate will return to the 1 reported.

61% down 52bp to 1.

09%, compared with the same period in 2018 1.

Basically flat, the bad generation gradually worsened; if released normally, the net profit growth rate of the interim return to the mother is comparable to the 6.

6% increase by 4.

9 to 11 pieces.
5%, compared with 11 disclosed in a quarterly report.

4% was flat.
Risk Warning: Economic Stall, Bad Outbreak