Bank of Communications （BoCom） attended our Access China 2018 conferencein Beijing today, and below are key takeaways:
NIM
BoCom sees NIM as flattish or going up slightly in 2018 and it might go up fasterif the PBOC hikes the benchmark rate （faster loan repricing）。 The loan repricingshould more than offset the slightly rising deposit rate. Major banks currentlyprice deposits at 1.3x benchmark rate and this should not change much goingforward. The bank may lift deposit growth in 2018 and cut interbank liabilitiesmodestly. Funding duration should go higher, with lower growth in demanddeposits.
Loan/asset growth
Asset growth and loan growth may slow down in 2018, but there is no balancesheet contraction pressure. The absolute new loan increase should be similar to2017 and retail loans should account for over 50% of the new loan mix （morecredit card/consumer loans and few mortgage loans）。 On corporate lending, SMEloans may grow faster. Overall loan duration may contract in a rising interest rateenvironment.
Credit cost and asset quality
Credit cost should be similar to 2017, if IFRS 9 impact is not considered. The bankexpects stable asset quality and the difference between overdue loans beyond90 days and NPLs should be reduced. They are still in the process of assessingIFRS 9 impact.
Fee income
BoCom expects fee income growth to accelerate in 2018 with credit card feesrunning at 20%-30% growth and no impact anymore from VAT. Agency feegrowth is likely to rebound, but WMP fees might decline.
WMP
The bank had around Rmb1.6trn WMP balance, of which 40%-50% is on balancesheet, booked under retail/corporate/interbank deposits. In 2017, WMP growthat the bank was higher than the industry average. 80% of WMPs were investedin the bond and interbank market, 10% in non-standardized credit assets andthe rest in equity and overseas investment. BoCom had around 10% NAV-typeWMP, ranking the top among peers. The bank sees that the WMP demand from retail is still strong and they are waiting for the final version of asset managementguidance to assess the business impact.