[ET Net News Agency, 26 February 2018] Citi Research estimates the 16 banks it covers
will report 4Q17 pre-provision operating profit (PPOP) growth of 7.2% y-y (vs. 5.1% in
3Q17) driven by better net interest margin (NIM) & fee income trends, and net profit after
tax (NPAT) growth of 4.2% y-y (vs. 3.9% in 3Q17) as banks adopt countercyclical
provisioning to smooth out earnings.
The research house expects investors to focus more on PPOP which more accurately reflect
banks' quality of growth.
Citi Research expects China banks (except BOC) to report 0-5bp q-q NIM expansion in
4Q17, thanks to higher loan yield (system RMB loan yield was up 47bp y-y in Dec 17) and
stabilized interbank rates, offsetting impact from higher deposit cost.
Citi Research expects sector-wide fee income growth to further improve from +1.7% in 3Q17
to +2.2% y-y in 4Q17, mainly due to the strong bank card business. It expects big 4 banks
to report largely flat fee income growth, except for ABC, for which we expect fee income
to drop 27% y-y due to expiry of contract to recover NPLs on behalf of MOF. Mid/small
banks are expected to report stronger fee income growth of +11.9% y-y on average. Citi
also expects most banks to report further asset quality improvement with lower NPL
formation, overdue loan >3m ratios & SML ratio in 4Q17. (HL)