NIM
Management mentioned that NIM trended better qoq in 4Q17 vs. a qoq declinein 3Q17, and it expects NIM to be stable or slightly higher yoy in 2018. On theasset side, management also expects the yield to see a yoy increase.
Loans
Overall liquidity conditions will remain tight in 2018. The bank completed aHKD31bn fund-raising at end-2017, so the overhang capping loan growth fromthe low capital ratio will be removed. Sector-wise, CEB will continue to followthe government’s instruction to support the real economy, i.e., lending to theinfrastructure, medical, education, consumption, and environmental protectionsectors.
Asset quality
Regarding credit cost, apple-to-apple credit cost might see a yoy decline in 2018,if excluding the impact of IFRS9. NPL formation continued to see a decline inthe past year, so management believes overall asset quality will trend better into2018. On the other hand, CEB still see pressure from over-capacitied industriesand zombie companies, while management also mentioned systematic risk is lesslikely.
Other highlights
Double-digit yoy growth in fee income is set to continue in 2018, underpinnedby rising consumption demand, wealth effect and so on. The slower fee incomegrowth in 3Q17 （only +3% yoy） was due mainly to seasonality and someaccounting treatment. For IFRS9, there is no impact to the bank's 5-categoryloan classification. The overall impact of IFRS9 on the bank is expected to bepositive given the higher coverage ratio should enable it to weather the downturn.
Regarding the new guideline on the asset management sector, managementexpects the impact on CEB’s funding to be manageable, once all WMPs are askedto be shifted off-balance sheet.