China Merchants Bank's net profit up 14.4% to RMB 51.8b

Thanks to ower expenses and provisions.

According to Barclays, China Merchants Bank released preliminary financial data for 2013 on 14 Feb 2014. The bank’s net profit was RMB 51.8bn for FY13 (+14.4% y/y), 2.5% and 4.6% ahead of our estimate (RMB 50.5bn) and Bloomberg consensus (RMB49.5bn), respectively.

Here's more:

While lacking detail, we suspect the better-than-expected result was driven mainly by lower expenses and provisions. Both of the bank’s NPL amount (+6.6% q/q) and NPL ratio (+4bps q/q) increased in 4Q13, but slowing from +14.6% q/q and +8bps q/q in 3Q13, respectively.

CMB's stronger-than-expected bottom line growth may act as a positive catalyst for the banking sector, we believe H-share China banks could move up into the result season and National People’s Congress (starting on 5 March), and banks’ current undemanding valuation (0.8x FY14E PB and 4.5x FY14E PE) will also support bank stocks in the near term. We retain our Overweight rating on CMB.

CMB pre-announced its 2013 financials on 14 Feb 2014, the bank’s net profit grew by 14.4% y/y to RMB 51.8bn in 2013 (under PRC GAAP), which beat our already higher-than-consensus forecast of RMB 50.5bn by 2.5%.

Due to the short of details, we cannot see the underlying profit growth drivers, though we suspect the good earnings growth was mainly driven by lower-than-expected expenses and provisions.