Can Ping An Bank weather weakening interest rates?

Its retail lending clients are less sensitive to borrowing rates..

Ping An Bank, a subsidiary of Ping An Insurance, has the capability to keep its retail lending rate high amidst a backdrop of declining market interest rate, reports UOB Kay Hian.

This is because retail clients are less sensitive to borrowing rate. Ping An’s decline in borrowing cost from the interbank market and higher returns from ordinary loans drove the net interest margin (NIM) to expand 27bp YoY or 0.27% higher to 2.62% in 2019.

Ping An Bank was also noted to have raised sufficient funds for loan expansion in 2020 whilst most banks in China are lacking in capital, especially small unlisted banks. The capital came from the $3.71b (RMB26b) of convertible bond transformed into equity and the $2.86b (RMB20b) of perpetual bond issued.

Customer loans rose 16.3% YoY to $330b (RMB2.33t) during the fiscal year.

Overall, the bank reported a net profit of $4.5b (RMB31.53b) for 2019, a 13.7% YoY growth compared to the $4.03b (RMB28.19b) earned in 2018. Meanwhile, the bank’s net interest margin (NIM) rose 27bp YoY to 2.62% during the year.

Non-performing loans (NPL) ratio also fell 0.10% YoY for the whole year from 1.75% in 2018 to 1.65% in 2019.