August 10, 2014

CHIB earnings P2.2b in 1H14

China Bank Corp. (CHIB) disclosed that its net income for 1H14 reached P2.2b, 25% lower YoY. The decline was mainly attributed to the absence of substantial trading gains this year. Total operating income excluding trading gains grew 43%. The bank’s net interest income rose 53% (P6.8b), driven by the 32% increase in assets (P457b), 42% increase in loans (P264b) and 34% increase in deposits (P388b).

Non-interest income, however, dropped 43% (P2.0b) due to lower trading gains. Despite the strong loan growth, the bank’s NPL ratio remained low at 1.01%. After conducting its stock rights offering, the bank’s capital adequacy ratio (CAR) stood at 16.2% while common equity tier 1 (CET1) ratio was at 14.8%.

Our take: CHIB’s 1H14 results show that the bank is focused on re-leveraging its balance sheet in order to take advantage of rising interest rates. The bank’s balance sheet growth is particularly noteworthy, and this has so far translated to healthy core earnings growth. We believe that these are steps in the right direction. However, the bank’s results are trailing the 2014 consensus estimate of P5.5b. – WealthSec