To The Moon

$Agricultural Bank Of China Limited(601288)$

ABC’s pre-provision operating profit (PPOP) & earnings rose by around 4% & 3% year-on-year (YoY) respectively in-line with expectations, but the growth rate decelerated further from 1Q22. While the results were supported by solid loan growth & robust dealing gains, net interest margin (NIM) contracted sequentially in 2Q22. While fee income growth decelerated to +0.2% YoY in 2Q22, it outperformed among the Big-4 state-owned banks. ABC guided mortgage-related risks are manageable. Its developers’ loan balance rose 1.5% HoH to CNY843b in 1H22, with developers’ loan accounting for around 4.5% of total loans & developers’ loan NPL ratio rose 58bps HoH to 4% in 1H22. Management guided that it would aim to enhance real estate-related risk control by identifying specific project risks from developer risks at the company level, & will support project-level mergers & acquisition to facilitate property project completion & delivery. Looking ahead, NIM is expected to remain under downward pressure, though the sequential compression may narrow. ABC’s NPL coverage was the highest among the Big-4 state-owned banks & can offer a counter-cyclical buffer to support the real economy & to keep shareholder returns at a stable level. I lowered earnings estimates by about 3% in 2023 by factoring in a dimmer NIM outlook & moderated fee income growth. 

May consider this stock over time.

@TigerStars

DYODD