is mainly due to overestimating CCB's net interest margin of . Among them, the rate of return on the asset side fell slightly higher than my assessment, and the rebound in the deposit cost on the liability side was also higher than my expectations. Therefore, once the two sides are touched, the evaluation of net interest margin will have a certain deviation. The forecast for this third quarter report has been revised accordingly based on the interim report data for reference.
The scale growth rate of net interest income
CCB's interim balance sheet expansion rate was slightly higher than I expected. This once again verifies what I said before: when the central bank is released, the balance sheet expansion rate of major banks is higher than the industry average, or even higher than the M2 growth rate; when the central bank closes the water, the asset scale growth rate of major banks will be lower than the industry average. In 7 and 8, the growth rate of M2 released by the central bank has repeatedly hit new highs, and has remained above 12%. It is estimated that this value in September will be difficult to be lower than 12% even if it is not innovative. The corresponding total assets year-on-year growth, the neutral value of is set to 13%. The optimistic value is 13.5%, and the pessimistic value is 12.5%.
Next, it is necessary to evaluate the proportion of the average daily interest-generating assets to the total assets. It should be noted here that since CCB and , China Merchants Bank, will not publish the average interest-generating assets for each month, so we need to calculate the average daily interest-generating assets ourselves. The method is to divide the net interest income annually by the net interest margin for the quarter. Since CCB announced the net interest margin for the year ending the reporting period in each quarter, the net interest margin for each quarter can be roughly estimated. It is estimated that the proportion of daily interest-produced assets in the third quarter of 2021 to 95.33% of total assets, and the proportion in the second quarter of 2022 was 93.16%.
's low share of the second quarter of this year also reflects from one aspect that large banks are facing a certain degree of asset shortage. The asset shortage in the third quarter only slightly improved in the second half. Therefore, a conservative estimate still sets the neutral proportion to 93%, which is basically the same as this year's interim report. The optimistic expectation is 93.5%, while the pessimistic expectation is 92.5%.
Net interest income net interest margin
CCB's net interest margin trend in the third quarter was definitely downward, mainly due to three factors:
first, the cumulative effect of the repricing of the 2 5-year LPR interest rate cuts has begun to gradually be reflected. The central bank has lowered its LPR interest rate twice this year, in May and August. The two cuts were mainly aimed at 5-year LPR. The downgrade in May was not effective in the second quarter of repricing, and this effect began to appear in the third quarter. Among the loan issuance of CCB, medium- and long-term loans represented by mortgages and infrastructure account for a high proportion, while short-term loans represented by credit cards, consumer loans and small and micro loans account for a low proportion. Therefore, it has been greatly affected.
Second, CCB does not track LPR loans account for a low proportion, such as credit card loans and consumer loans.
Third, the deposit interest rate cut was not implemented on September 15, and the effect of reducing liability costs in the third quarter was very small.
So, my neutral expectations for the net interest margin of CCB in the third quarter are 1.99%, optimistic at 2.0%, pessimistic at 1.98%.
Comprehensive the previous analysis of the scale of interest-generating assets and net interest margin, my prediction of CCB's net interest income is shown in Table 1 below. Neutral expectations are 158.85 billion, pessimistic expectations are 156.507 billion, and optimistic expectations are 161.217 billion.
Table 1
handling fee income
CCB's handling fee income has a very obvious start-up feature. Usually, there are high incomes and high growth in the first quarter, and there will be a significant month-on-month decrease in the second quarter. In the past few years, the handling fees of CCB in the third quarter have dropped slightly month-on-month. For example, the handling fees in the third quarter of 2021 decreased by 4.18% month-on-month, and the handling fees in the third quarter of 2020 decreased by 3.35% month-on-month. This year's handling fee performance was weak, with conservative choices falling by 4% month-on-month as a neutral assessment, that is, the third quarter's single-quarter fee revenue was 26.64 billion, and ±1 billion was used as the upper and lower boundaries of fluctuations.
Other non-interest income
Other non-interest income refers to the remaining part after the non-interest income is removed from the handling fee income. For CCB, it includes two major parts: investment income and other income. Other income is mainly the premium income of CC Life , and the difference between this part and other expenses (premium compensation) is the effective income.Since the difference between premium income and effective income is huge, when I make a construction performance forecast, I will deduct other income and other expenses on both ends of the revenue.
CCB's other non-interest income performance this year was particularly bad, recording a net loss of about 2.8 billion yuan in the first quarter, and net income in the second quarter was about 6 billion yuan before it pulled the first half of the year to a positive number. Generally, the investment income of CCB is smaller. The bid and sale spread generated by trading financial assets or the fair value changes of are relatively small. The main thing is the interest income of some funds, which was relatively stable in the middle and last three quarters of previous years. So, for this land assessment, I use 6 billion as the neutral value and ±1 billion as the fluctuation boundary.
Credit impairment loss
CCB's credit impairment losses in the third quarter of the past two years have both dropped significantly month-on-month. Credit impairment in the third quarter of 2021 decreased by 40% month-on-month and 20% month-on-month in the third quarter of 2020. In the third quarter of this year, the overall asset quality of the banking industry should still be in a slow downward stage. However, relatively speaking, CCB does not account for a high proportion of credit card loans and real estate development loans. Therefore, the performance of asset quality is relatively stable.
Therefore, when I estimate credit impairment, I will be neutral by a 30% month-on-month decrease. The month-on-month decrease was 20% and 40%, which were pessimistic and optimistic expectations respectively.
Operating expenses
CCB's operating expenses this year are to lower the growth rate of operating expenses against the background of pressure on net interest margins and ensure that the growth rate of net profits maintains positive growth. The operating expenses of the Interim Report CCB increased by only 7.88%. In the third quarter, CCB's net interest margin continued to decline. I personally believe that CCB will further reduce the year-on-year growth rate of operating expenses, slightly lower than the interim report. Therefore, I gave the neutral value of operating expenses in the third quarter to be 52.2 billion, that is, operating expenses in the third quarter increased by 7.47% year-on-year.
Income tax rate
According to the data disclosed in the interim report of CCB this year, CCB's income tax rate is 16%, far lower than the level of the same period last year. This shows that CCB has added tax-free assets such as government bonds and funds to its asset allocation this year. So, during the third quarter evaluation, I adopted an income tax rate of 16%.
According to the previous analysis, the data of each evaluation can be summarized to obtain the performance evaluation of the interim report of China Construction Bank as shown in Table 2:
Table 2
2022 CCB's third-quarter performance growth rate can reach 3.25% under pessimistic expectations, 10.88% under optimistic expectations, and 7.07% under neutral expectations. The high probability range falls within the range of 7.07%±1.5%, that is, 5.57%~8.57%.
