Chongqing Rural Commercial Bank's loans up 20% at end-2012

Check out CRCB's results here.

According to Barclays, the bank’s NIM was up 22bps q/q to 3.6% in 4Q12, after sequential NIM contractions of 13bps in 2Q12 and 5bps in 3Q12, which also drove the NIM in 2H to remain flat h/h at 3.5%.

Barclays believes the improved NIM was likely due to 1) lower-than-expected interest costs as time deposits repriced, 2) stronger pricing on corporate (average yield was up 24bps h/h) and 3) increased low-cost demand deposits which accounted for 42.3% of total deposits at end-2012 (up from 39% at end-June 2012). 

While the bank’s mortgage loan (around 20% of the total loans) would be re-priced in 1Q13 and further pressure the NIM, the analyst believes the negative could be partly offset by continued time deposit re-pricing.

Here's more from Barclays:

Fee income rebounded in 4Q12: CRCB’s net fee income fell 31% y/y to RMB 436m in 2012 but rose 43% h/h in 2H12. The y/y decline was mainly due to the decline on consultancy and advisory fees (down 58% y/y), likely negatively affected by the regulatory tightening on fee charges as well as less pricing power than before.

However, we observe that other fee incomes have gradually picked up. In 2H12, agency services (up 12% y/y), bank card fees (up 57%) and fee collection commission (up 97%) had strong growth. Going forward, we expect the fee income growth will be stable if no further regulatory tightening on fee income.

Fast loan, deposit, and asset growth: CRCB’s total loans increased 20% y/y to RMB 174bn at end-2012. In 2H/4Q, its loan growth was 6% h/h /3.1% q/q, faster than the banking system average (5.6%/2.4%).

Industry-wise speaking, construction loans (up 24% h/h), wholesale & retail loans (up 15%) and personal business loans (up 11%) were the key drivers of the loan growth in 2H12, while the bank reduced its exposures to property development (down 4.8% h/h), water, environment and public utility management (down 20%), farmers (down 16%) and discounted bills (down 19%).

In 2H/4Q, the bank’s deposit growth was 8.8% h/h /4.8% q/q, also faster than system average (3.9%/2%). Loan to deposit ratio further reduced to 58.9% (down 98bps q/q) at end-2012.

Total assets reached RMB433 bn, up 9% q/q in 4Q12, primarily due to 1) a rebound of reverse repo (up 68% q/q in 4Q vs down 38% q/q in 3Q) and 2) an increase on investment receivables (up 23% q/q) which included debt securities issued by corporations (up 2.1x h/h in 2H) and financial institutions (up 37% h/h).

Very low credit charge: The bank continued to report decline in both NPLs (down 11% q/q to RMB 1.7bn) and NPL ratio (down 16bps q/q to 0.98%) at end-2012. However, NPLs on property development (up 37.8x h/h) and rental, commercial & servicing (up 50.5x h/h) increased significantly in the 2H12.

Due to improvement on asset quality, we estimate that the bank realized a RMB 26m loan loss provision in 4Q12. Credit charge on total loans was only 0.04% in 2H12 (vs 0.31% in 1H12). However, it made RMB 240m provision on the treasury business and other investment assets in 4Q12.

Increasing cost to income ratio: The bank’s operating expenses increased 27.2% y/y to RMB 6.1bn, driven by staff cost (up 30% y/y), administrative expenses (up 27% y/y) and tax & surcharges (up 32% y/y). Since its operating income growth was only 22% y/y, its cost-to-income ratio increased to 44.5% in 2012 from 43% in 2011.

Sharp decline on capital ratio: The Tier-1 ratio/CAR decreased slightly by 70bps/75bps q/q to 12.02%/12.93% at end-2012, following a slightly increase of 9bps/2bps q/q in 3Q12.

Fast loan growth (6% h/h) and RWA growth (9.3% h/h) continued to pressure the capital adequacy. RWAs accounted for 58% of its total assets at end-2012 (up from 57% as of end-June 2012), driven by rapid on-balance sheet asset growth (up 26% y/y) as well as off-balance credit commitments (up 21% y/y).

On 22 March 2013, the bank announced a plan to issue RMB 5bn sub-debts to replenish its supplementary capital. The bank also announced a final cash dividend of RMB 0.17 per share for 2012. The payout ratio was 29% (vs 31% in 2011).