Shareholders’ net profit grew by 10.3% yoy in 2021
Resilient performance reflected by consolidated asset quality
Maintain BUY rating and TP at HKD5.95
　　In line 2021 profits with improved asset quality
　　1) PPOP increased by 5.3% yoy, and shareholders’ NP rose by 10.3% yoy in 2021 (ord. shareholders’ NP increased by 10.3% yoy in 2021, meeting our expectation). 2) NIM stood firm at 2.11% in 2021, slightly narrowed from 2.15% in 2020, partly due to the policy of reducing the real financing cost of enterprises. 3) ICBC’s results showed development resilience highlighted by its improved asset quality in the fourth quarter of 2021. NPL ratio decreased to 1.42% at end-2021, compared with 1.52% at end-3Q21 and 1.58% at end-2020. The balance of NPL also dropped by 5.7% qoq in the fourth quarter of 2021. The allowance to NPL ratio of ICBC at end-2021 was 205.84%, up 9.04pct qoq or 25.16pct yoy. 4) Consistent with the cross- cyclical policies, ICBC’s corporate loan growth was fast in sectors such as Water, environment and public utility management/Leasing and commercial services/Transportation, storage and postal services (18.7%/15.7%/14.1% yoy in 2021). Inclusive loans grew by more than 50% yoy in 2021. Personal business loans surged by 34.7% yoy in 2021, mainly because of the increasing market shares of online inclusive finance product “e-Mortgage Quick Loan”. 5) ICBC’s overall 2021 result is in line, and it demonstrates a balanced approach between value creation, market standing, and risk management while delivering cross-/counter- cyclical policies.
　　Management discussion
　　Property-related risks: The NPL ratio of real estate corporate loans has rebounded at end-2021 mainly due to the impact of a few big clients. The proportion of such loans is low and the risk is controllable. The management expressed confidence on asset quality in foreseeable future. NIM trend: Per the management, there is some downward pressure on NIM from the policy perspective (such as to reduce the real financing cost of enterprises), but ICBC has the means to maintain a reasonable NIM.
　　Maintain BUY rating and TP at HKD 5.95
　　ICBC is trading at ~3.87x 22E P/E, or ~0.44x 22E P/B. Valuation is not demanding measured by P/B or dividend yield (Fig. 6-7). We slightly revised 22E/23E forecasts for the Company (Fig. 2). ICBC is the industry leader with stable performance records. Maintain BUY on undemanding valuation and its consolidated asset quality, with TP at HKD5.95, equal to 0.55x 22E P/B, or a 20% discount to past 5-year avg. P/B. Key catalysts: better-than- expected asset quality, NIM expansion; key downside risks: worse-than- expected asset quality, NIM pressure.