DISCLOSUREAPPENDIXATTHEBACKOFTHISREPORTCONTAINSIMPORTANTDISCLOSURES,ANALYSTCERTIFICATIONS,LEGALENTITYDISCLOSUREANDTHESTATUSOFNON-USANALYSTS.USDisclosure:CreditSuissedoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethattheFirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.7January2019AsiaPacific/ChinaEquityResearchBanksChinaBanksSectorResearchAnalystsChungHsu,CFA886227156362chung.hsu@credit-suisse.comChienPoHuang886227156342chien-po.huang@credit-suisse.comEthanWang85221016756ethan.wang@credit-suisse.comTHEME2019Outlook:StrivingforafinebalanceFigure1:Chinabanks’profitgrowthwillslowto5.4%in2019Source:Companydata,CreditSuisseestimates■Slowergrowthtriggersmorepolicysupport.In2019,Chinabankswillcontinuetobetornbyaslowingeconomybutmorepolicysupport.PolicywillstayaccommodativeandprovidesentimentsupportforbanksbutprofitswillseepressureasbigbanksstarttoshowNIMimpactfromlowermarketratesalongwithslowerloangrowth.Asthegovernmentcontinuestoaddstimulusandstrivestokeepthesystemsupported,itfacesagrowingchallengeoffindingthat"finebalance"ofprovidingenoughstimuluswhileensuringthede-leveragingeffortisnotquestioned.Againstthisbackdrop,webelievebankswillbepressuredtolendmorebutgiventheincreasedmacrouncertaintiesandprovisionrequirement,webelievebankswillbereluctanttodoso.Hence,wemaintainour9%loangrowthestimateforthe11banksunderourcoverage,whichisamoderateslowdownfromthe9.5%in2018.■Lowerprofitestimatesforbigbanks.Welowerprofitgrowthestimatesforthesectorto5.4%in2019from7.6%,mostlytoreflecta2bplowerNIMforthebigbanksonlowermarketrates.WekeepourNIMforecastsforJSBs,however,offsetbylowerwholesalefundingandfasterretailloangrowth.Weexpectcreditcosttostayelevated(flatYoY)despitebankshavingguidedforlowernewNPLformationgiven(1)IFRS9;(2)weakmacro;and(3)morestringentNPLrecognitionwillkeepprovisionshigh.■Valuationandstockcalls.Thesectoristradingn...
