UBS: China CITIC Bank (00998)'s profit growth in the third quarter was superior to that of its peers, driven by strong investment returns and cost controls

The Zhitong Finance App learned that UBS released a research report saying that China CITIC Bank (00998)'s profit growth in the third quarter was superior to that of its peers. Driven by strong investment income and cost control, it maintained a “buy” rating and target price of HK$10.4.

China CITIC Bank announced a net profit of 55.3 billion yuan for the first nine months of this year, up 3.6% year on year, slightly higher than the bank's expectations. Net profit for the third quarter alone rose 4.6% year on year to RMB 17.7 billion. The growth rate was faster than 3.1% in the first half of the year, and superior to peers.

The bank pointed out that revenue for the third quarter rose 3.8% year on year, supported by a 44.7% year-on-year increase in other non-interest income. Among them, net income from investment securities rose 68.2% year on year; however, net interest income fell 0.5% year on year, and net handling fee revenue fell 6.4% year on year. Operating expenses for the third quarter fell by 9.2% year on year, reflecting strong cost control, and operating profit before provision rose 10.4% year on year. However, credit impairment losses rose 17.1% year on year. Credit costs in the third quarter were 119 basis points, and net profit growth slowed to 4.6% due to a 10.9% increase in income tax. The bank believes it is still good and ahead of its peers.

The bank calculated a net interest spread of 1.6% for the third quarter, down 2 basis points from quarter to quarter and 3 basis points year on year. Total loans rose 3.7% year on year and fell 0.2% quarterly, driven by corporate loans; retail loans were weak across the board. The ratio of non-performing loans remained unchanged at 1.15%, while the ratio of concerned loans rose to 1.74%. The core Tier 1 capital adequacy ratio improved quarterly to 9.43%. The bank expects a slightly positive market reaction.