August 06, 2015

CHIB nets P2.5b in 1H15

In a disclosure to the Exchange, China Bank (CHIB) said that it recorded net income of P2.5b in 1H15, 14% higher YoY. This is equivalent to RoE of 8.7% and RoA of 1.1%. Net interest income is up 9% YoY to P7.4b, on the back of 5% asset growth (to P479b) and 10% loan growth (to P289b).

Consumer loans grew faster than total loans, growing by 26% YoY. Though deposits only increased by 3%, CASA deposits grew by 14% YoY, improving the bank’s CASA ratio to 51% as of end-2Q14 from 46% last year. Operating income grew 8% YoY to P9.5b while operating expense growth was kept at 6% (to P6.0b) despite the bank’s ongoing expansion. This led to an improvement in the bank’s cost-to-income ratio to 63.5% from 65.0% last year. The bank’s CET1 and Tier 1 ratios stood at 13.6% and 14.5% as of end-2Q15. Both are above regulatory thresholds.

Our take: CHIB’s 1H15 results came below expectations as it accounted for only 43% of 2015E consensus estimate. We also note that CHIB’s annualized RoE of 8.7% will significantly come in lower than the 2015E RoE of banks such as MBT and BDO, which we estimate at 11.3% and 13.7%, respectively. Meanwhile, faster growth of CHIB’s consumer loan portfolio and sustained improvement of its CASA ratios bode well for the bank’s efforts to shore up its margins. – WealthSec