3Q21 results in line with our expectationsChina Everbright Bank （CEB） has announced that its revenue andattributable net profit in 1–3Q21 rose 9.4% and 18.5% YoY. In 3Q21, itsrevenue and attributable net profit increased 14.5% and 12.4% YoY, in linewith our expectations.
Trends to watch
Revenue grew rapidly; profit grew fast despite high base effect.
H-share revenue rose 9.4% YoY in 1–3Q21 （vs. 6.9% YoY in 1H21）， due tosolid earnings from the intermediary business and investment income. In1–3Q21, the ratio between costs and revenue stood at 26.3% （vs. 26.5% in1–3Q20）， reflecting the firm’s steady expense control.
Credit lending drove loan expansion; NIM dropped slightly.
At end-3Q21, CEB’s total assets grew 5.92% （vs. the start of 2021）。
Specifically, total loans increased 9.22% （vs. the start of 2021）。
Revenue from intermediary business increased; sound investmentreturns. In 1–3Q21, CEB’s non-interest revenue grew 33.3% YoY, while itsintermediary revenue and investment return both increased.
Asset quality and risk resistance capability improving. In 3Q21, thefirm’s non-performing loans fell 0.02ppt QoQ to 1.34%, and provisioncoverage ratio rose 1.7ppt QoQ to 185.8%. See details on page 3Financials and valuation
We maintain our 2021 and 2022 earnings forecasts. A-shares are tradingat 4.4x 2021e and 3.9x 2022e P/E, and 0.5x 2021e and 0.5x 2022e P/B.
H-shares are trading at 3.0x 2021e and 2.7x 2022e P/E, and 0.3x 2021eand 0.3x 2022e P/B. We maintain OUTPERFORM and our TP of Rmb4.50（5.8x 2021e and 5.1x 2022e P/E, and 0.7x 2021e and 0.7x 2022e P/B） forA-shares, offering 30.8% upside from the current price. We maintainOUTPERFORM and our target price of HK$3.92 （4.3x 2021e and 3.9x2022e P/E, and 0.4x 2021e and 0.4x 2022e P/B） for H-shares, offering43.5% upside.
Risks
Asset quality disappoints; implementation of wealth management strategyproceeds more slowly than we expected.