According to a research report from UBS, CITIC Bank (00998) saw its third-quarter profit growth outperform its peers, driven by strong investment gains and effective cost management. The bank maintains a "Buy" rating with a target price of HK$10.4.
CITIC Bank reported net profit of RMB 55.3 billion for the first nine months of this year, up 3.6% year-on-year, slightly exceeding the bank's expectations. For the third quarter alone, net profit rose 4.6% year-on-year to RMB 17.7 billion, accelerating from the 3.1% growth in the first half and surpassing peers.
The report noted that third-quarter revenue increased 3.8% year-on-year, supported by a 44.7% year-on-year rise in other non-interest income, including a 68.2% year-on-year increase in net gains from investment securities. However, net interest income fell 0.5% year-on-year, and net fee income declined 6.4%.
Third-quarter operating expenses dropped significantly by 9.2% year-on-year, reflecting strong cost management, with pre-provision operating profit rising 10.4% year-on-year. However, credit impairment losses increased 17.1% year-on-year, with third-quarter credit costs at 119 basis points. Combined with a 10.9% increase in income tax, net profit growth slowed to 4.6%, which the bank considers still solid and leading among peers.
The bank calculated a third-quarter net interest margin of 1.6%, down 2 basis points quarter-on-quarter and 3 basis points year-on-year. Total loans rose 3.7% year-on-year but fell 0.2% quarter-on-quarter, driven by corporate loans, while retail loans were broadly weak. The non-performing loan ratio remained unchanged at 1.15%, while the special mention loan ratio rose to 1.74%. The core tier-one capital adequacy ratio improved quarter-on-quarter to 9.43%.
The bank expects a slightly positive market reaction.
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