ICBC's 2016 net profit hits US$40b

It's flat year-on-year and in line with consensus.

According to Jefferies, ICBC reported 2016 net profit of Rmb278b (US$40b). ICBC had the least NIM contraction among peers and cost control was also decent.

"However it also reported a bigger NPL ratio increase and a lower NPL coverage than peers. Management later provided detailed NPL and margin discussion during the analyst briefing and showed high confidence for 2017 trends."

Here's more from Jefferies:

2016 results are a bit mixed. On the bright side, 1) NIM contraction was smaller at 31bp vs. CCB's 43bp or ABC's 41bp, mainly due to its stronger ability to maintain asset yield; 2) expenses dropped 2%; and 3) profitability and capital ratio are both strong with 15.2% ROAE and 12.9% CT1 CAR. On the other hand, its B/S expansion is the slowest among peers with 9% loan and deposit growth. Further, NPL ratio rose 12bp to 1.62%, contrary to CCB's 6bp and ABC's 2bp contraction.

Management appears optimistic and thoughtful for future strategy. In analyst briefing, management commented that the newly formed NPL and overdue loans were declining sequentially during 2016.

Meanwhile, its NIM contracted very little in 4Q16, and 2017 ytd margin is stable vs. 4Q16. ICBC made clear elaboration of its business strategy in the briefing, and the new senior manager team appeared confident, competent and thoughtful. We provide details notes for the briefing Q&A in page 3-5 and recommend investors to have a thorough read.

Repeat our investment case. We like ICBC because the bank tends to have a conservative risk appetite, demonstrates consistent and leading cost control capabilities and has decent capital ratios. It also has leading IT system among large peers.

Further, the chairman and president of ICBC, Mr. Yi Huiman and Mr. Gu Shu, have both been promoted internally and have worked at ICBC for some 30 and 20 years. This is the only “internal promotion” case among peers of SOE banks. Therefore, we expect ICBC to have stable strategy and smooth execution for the foreseeable future.