瑞信-亚太地区-宏观策略-瑞士信贷亚洲金融观察(FIA)-2019.4.30-26页.pdf

Credit Suisse Financials Insights Asia(FIA)Top stories and ideas30 April 2019Ashish GuptaTop of the Pack3Korea Insurance SectorNew report:Premium hike benefit will take timeJeehoon ParkRest of the Pack4China Merchants Bank Co Ltd3968.HK600036.SS1Q19 results in lineMaintain NEUTRALChung Hsu5PICC P&C2328.HKNPAT and CoR disappointing,but already in the priceMaintain NEUTRALCharles Zhou6Bank of Communications3328.HK601328.SS1Q19 results in-lineMaintain NEUTRALChung Hsu7PICC Group1339.HKStrong NB sales,but P&C disappointingMaintain NEUTRALCharles Zhou8Ping An2318.HK601318.SSSolid OPAT and margin expansion;agency a key to watchMaintain OUTPERFORMCharles Zhou9Industrial&Commercial Bank of China1398.HK601398.SS1Q19 results:Stronger PPoP with extra provisions to boost reservesMaintain OUTPERFORMChung Hsu10Citic Securities6030.HK600030.SSSolid 1Q19 on soaring investment;IBD outpaced peersMaintain NEUTRALCharles Zhou11China Construction Bank0939.HK601939.SS1Q19 results ahead on NIM rebound and strong non-int incomeMaintain OUTPERFORMChung Hsu12DB Insurance005830.KSSolid long-term insurance profitabilityOUTPERFORMJeehoon Park13Samsung Life Insurance032830.KSDragged down by lower ratesNEUTRALJeehoon Park14Hyundai Marine&Fire001450.KSConsensus too optimistic on premium hike benefitNEUTRALJeehoon Park15Samsung F&M Ins000810.KSPremium company on premium valuationNEUTRALJeehoon Park16India Financial sectorThe second waveAshish Gupta17HDFC Life Insurance Company LimitedHDFL.BO4Q19:Strong on margins even as growth moderatesMaintain NEUTRALAshish Gupta18PT Bank Mandiri(Persero)TbkBMRI.JK1Q19 results:Beat on lower-than-expected provisionsMaintain NEUTRALLaurensius Teiseran19DBS Group Holdings LtdDBSM.SINew report:Strong 1Q19,ROE surpassed expectationsMaintain OUTPERFORMDanny Goh20AEON Thana Sinsap PCLAEONTS.BKQuick Take:4QFY19 results-healthy as expectedMaintain OUTPERFORMWarayut Luangmettakul21Bank of China Ltd3988.HK601988.SSIn-line 1Q19 resultsMaintain OUTPERFORMChung Hsu22Public BankPUBM.KLNew report:Sluggish 1Q19 results do not support premium valuationsMaintain UNDERPERFORMDanny GohKey ChangesEPSTP(%change)T+1T+2ChgUp/DnRatingCMB(H)0.00.00.0(7.2)NCMB(A)0.00.00.0(8.9)NPICCP&C2.30.60.05.9NDBIInitiationn.a.20.9OSLIInitiationn.a.11.6NBCOM(H)1.22.40.0(7.6)NBCOM(A)1.22.40.01.0NPing An(H)1.20.21.818.7OPing An(A)1.20.22.113.4OHMFInitiationn.a.10.5NEquities ResearchDISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES,ANALYST CERTIFICATIONS,LEGAL ENTITY DISCLOSURE ANDTHE STATUS OF NON-US ANALYSTS.US Disclosure:Credit Suisse does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only asingle factor in making their investment decision.EPSTP(%change)T+1T+2ChgUp/DnRatingSFMInitiationn.a.8.9NDBSGroup4.33.33.712.1OICBC(H)(2.2)(2.2)0.020.1OICBC(A)(2.2)(2.2)0.017.2OCCB(H)1.11.10.023.0OCCB(A)1.11.10.08.0OCITICS(H)0.10.30.04.2NCITICS(A)0.10.30.0(31.8)UBankMandiri2.12.12.56.8NHDFCLife1.02.93.67.7NBOC(H)0.00.00.019.4OBOC(A)0.00.00.018.3OTuesday,30 April 20192Credit Suisse Financials Insights Asia(FIA)30 April 2019Asian DailyKorea Insurance SectorNew report:Premium hike benefit will take timeWe initiate coverage on Korea insurers with an OUTPERFORM ratingon DB Insurance,and with NEUTRAL ratings on Samsung F&M,Hyundai M&F,and Samsung Life.Premium hikes for auto insurancehave started,and health insurance premium hikes have resumed aftera short pause.That said,claims are also on an uptrend and maynot stabilise easily,and we believe it will take longer than consensusexpects for earnings to show a visible uptrend.Our 2019 earningsestimates are 6-16%lower than consensus.Auto underwriting cycle turnaround in playWe believe auto insurance is about to enter a cycle of improving lossratios.The non-life insurers have hiked auto insurance premiums by3-4%in January 2019,and according to Korea Economic Daily theywill hike premiums by 1-2%again in May.We believe premium hikeswill eventually continue until profitability stabilises,but we think theprofitability stabilisation could take longer than consensus expectation,mainly because of continued uptrend in claims.We believe the non-lifeinsurers will eventually benefit from the cycle,but expect the earningsimprovement to start slowly from 2H19 and take on a clearerimprovement in 2020.We estimate the average auto loss ratios of non-life insurers to deteriorate slightly to 86.9%in 2019 from 86.0%in2018,and then improve to 84.5%in 2020.An improvement of 1 pp inthe auto loss ratio increases net profit by 3-7%.Long-term line premium hikes continuingWe expect long-term risk premium to grow 12%YoY for non-lifeinsurance and 4%YoY for life insurance.We believe the two maindrivers of premium growth are(1)premium hikes in medical indemnity,and(2)re-pricing of legacy policies that have not yet been re-priceddue to different re-pricing terms.We think the non-life insurers stand tobenefit more than the life insurers,as standardised medical indemnitypremiums have been actively raised since 2015,and non-life insurersmedical indemnity premiums are over 30%of total long-term riskpremium while they are only c.10%for life.We believe our analysisframework of the long-term insurance is unique and not shared by ourpeers,and we explain this in more detail in the appendix section of themain report.Time needed before benefits materialiseWhile we believe DBI and HMF are bigger beneficiaries of the premiumhikes than peers,we also believe the benefit will be realised slowly,with signs of benefits coming through from 2H19.However,we believeconsensus is overly positive on HMFs earnings for 2019,as it assumesa 21%YoY earnings improvement,which we believe will be tough toachieve under the current rising claims environment.Hence,we initiatecoverage on DBI with an OUTPERFORM but HMF with a NEUTRAL;our 2019 earnings estimate for HMF is 16%lower than consensus.For SFM,we initiate the stock with a NEUTRAL as it has alreadybeen a big outperformer on more stable earnings and higher dividendcommitment.We also initiate SLI with a NEUTRAL,given our viewof the limited steepening bias for the yield curve.Key risks include:(1)a prolonged underwriting recovery with claims remaining higher forlonger,and needing more premium hikes in 2019 to lead to a loss ratiodecline,(2)regulations,and(3)interest rates.Figure 1:Insurers with bigger earnings influenced by the auto line have goodshare price correlation with the auto loss ratiosSource:Company data,INSIS,/Note:Non-life Insurers index is the sum of DBI and HMF,and is invertedWe initiate coverage on Korea insurers with an OUTPERFORM ratingon DB Insurance,and with NEUTRAL ratings on Samsung F&M,Hyundai M&F,and Samsung Life.Premium hikes have started,butwe believe it will take longer than consensus expects for earnings toshow a visible uptrend.Non-life insurers have hiked auto insurance premiums in January 2019and are likely to make additional premium hikes going forward.However,we expect the earnings improvement to start slowly from2H19 and take on a clearer improvement in 2020.We expect long-term risk premium to grow 12%YoY for non-lifeinsurance and 4%YoY for life insurance,driven by premium hikes inmedical indemnity,and re-pricing of legacy policies.Our top pick in the Korean insurance sector is DB Insurance.Webelieve the insurer will be a beneficiary of auto and long-term premiumhikes,which should complement its already profitable long-terminsurance business.Valuation metricsTPUp/dnDYRatingPriceTargetchgto TPYearEPS Chg(%)EPSEPS grth(%)P/E(x)(%)P/B(x)ScenarioCompanyTicker(prev.)Localprice(prev.)(%)(%)TT+1T+2T+1T+2T+1T+2T+1T+2T+1T+1Blue skyGrey skySFM000810.KSN303,000330,000n.a.8.912/18n.an.a21,09324,925(12.6)18.214.412.23.51.0390,000270,000DBI005830.KSO69,50084,000n.a.20.912/18n.an.a8,46510,0334.118.58.26.93.20.8100,00064,000HMF001450.KSN38,90043,000n.a.10.512/18n.an.a4,6125,8942.427.88.46.62.80.755,00032,000SLI032830.KSN85,10095,000n.a.11.612/18n.an.a6,3116,865(31.9)8.813.512.43.30.5131,00060,000Source:Refinitive,Credit Suisse estimatesResearch AnalystsJeehoon Park/82 2 3707 3763jeehoon.parkcredit-Jennifer Yu/82 2 3707 3738jennifer.yu.2credit-3Credit Suisse Financials Insights Asia(FIA)Maintain NEUTRALPrevious Rating:NEUTRALTarget price(HK$):37.00Previous target price(HK$):37.0030 April 2019Asian DailyChina Merchants Bank Co Ltd(3968.HK600036.SS)1Q19 results in lineSlightly better PPoP offset by slightly higher credit costsCMB reported 1Q19 net profits of Rmb25.2 bn(+11.3%YoY)thataccounted for 28%of our full-year estimates.CMBs 1Q19 PPoP was tracking slightly ahead of our full-yearestimates partly due to slower than expected OPEX increase of just9.3%.Meanwhile,operating income was tracking roughly in-line withour estimates as net interest margin further improved by 6 bp QoQ to2.72%with loan growth of 11%(vs 10.3%in FY18).Yet,fee incomegrowth was a bit slower at+1%in 1Q19.Figure 1:CMBs quarterly P&LsSource:Company data,Credit Suisse estimatesCredit cost in 1Q19 were a bit higher as CMB took a bit more loanloss reserve with total provision charge+14%YoY vs 11%loan growthand 8.7%asset growth.As a result,NPL coverage further improvedto 363%from 358%in end-2018 and total reserve to loan ratio rose to4.8%,near the peak.We tweak our operating forecasts post the result but keep ourFY19-20E unchanged.Maintain NEUTRAL.Price(29-Apr-19,HK$)39.85Mkt cap(HK$/US$mn)1,032,370/131,624Number of shares(mn)25,220Free float(%)100.052-wk range(HK$)41.25-27.00ADTO-6M(US$mn)97.2Est.pot.%chg.to TP(7.2)Blue sky scenario(HK$)46.0Grey sky scenario(HK$)22.0Performance1M3M12MAbsolute(%)4.521.121.9Relative(%)1.39.825.8Year12/18A12/19E12/20E12/21EPre-provision Op profit(Rmb mn)166,025179,811198,495220,671Pre-tax profit(Rmb mn)106,497118,689131,928145,830Net attributable profit(Rmb mn)80,560.089,913.5100,600111,926EPS(CS adj.)(Rmb)3.193.573.994.44Chg.from prev.EPS(%)n.a.0.00.0(0.5)Consensus EPS(Rmb)n.a.3.574.04.52EPS growth(%)14.811.611.911.3P/E(x)10.79.68.67.7Dividend yield(%)2.73.13.43.8BVPS(CS adj.)(Rmb)20.0722.6925.6328.89P/B(x)1.71.511.331.18ROE(%)15.715.615.515.4ROA(%)1.21.31.31.4Tier 1 Ratio(%)12.613.013.613.9Source:Company data,Refinitiv,Credit Suisse estimatesFigure 2:CMBs quarterly key ratiosSource:Credit Suisse estimates,Company data,Note:annualized numbersCMB reported 1Q19 net profits of Rmb25.2 bn(+11.3%YoY),tracking in line with our full-year estimates.Slightly better PPoP.CMBs 1Q19 PPoP growth(+13%)wasstronger than our estimates due to lower OPEX growth of just 9.3%.Operating income were in line with better NIM(+6 bp QoQ)offsetby a bit slower fee income growth of just 1%in 1Q19.Loan growthof 11%was slightly better with asset growth also stronger(+8.7%).We believe OPEX growth should pick-up into the year and possiblyoffset some of the operating income strength this year.Slightly higher credit costs to raise reserve.Credit cost in 1Q19 wasa bit higher at 168 bp(annualized)with total provisions+14%YoYvs 11%loan growth.NPL ratio were steady with coverage ratioimproved to 363%due to slightly higher provisions.We tweak our operating forecasts but keep FY19-20E unchanged.Maintain NEUTRAL.Research AnalystsChung Hsu,CFA/886 2 2715 6362chung.hsucredit-Chien Po Huang/886 2 2715 6342chien-po.huangcredit-4Credit Suisse Financials Insights Asia(FIA)Maintain NEUTRALPrevious Rating:NEUTRALTarget price(HK$):9.50Previous target price(HK$):9.5030 April 2019Asian DailyPICC P&C(2328.HK)NPAT and CoR disappointing,but already in the priceNPATdraggedbydeteriorated underwritingprofitdespiteimproved tax.1Q19 NPAT(standalone)declined by 4%YoY toRmb5.2 bn,tracking 29%/26%of CSe/Bloomberg cons FY19E,asdeterioratedunderwritingperformanceoutweighedimprovedinvestment and tax.Including FV gains,disposal gains,and impairment,total investment income grew 11%YoY in 1Q19,thanks to A-sharerally.Besides,we are glad to see alleviated tax burden,as effective taxrate reduced by 11 pp to 19%,alongside improved expense ratio(down0.8 pp to 33.7%,per our calculation),which is primarily attributable tolower commission rates,in our view.Loss ratio,however,deterioratedby more than 3 pp to 64%+.Underwriting profits were more thanhalved,due to(1)higher loss ratio in auto lines,on the back of lowerpremium adequacy amid deepening auto pricing reform and slowdownof new vehicle business(i.e.,new cars tend to have higher premiumadequacy),and(2)heightened losses of non-auto,particularly fromagriculture(e.g.,outburst of swine fever,as we highlighted in priordowngrade note)and commercial property(e.g.,321 chemicalexplosion-Sina news).Overall,CoR was up 2.6 pp YoY to 98.3%.NAV expanded 9%QoQ,a bright spot.Comprehensive solvencyremained strong at 267%at end-1Q19.Auto premium growth remained subdued;strong non-auto.Totalpremium growth was strong at 18%in 1Q,boosted by strong non-auto lines(+39%YoY),particularly from accident and health(+57%,accounting for 23%of total premium)and credit insurance(+1.4x YoY).Auto momentum,however,remained subdued at 3.6%in 1Q19(vs+3.9%in FY18)on deepening auto pricing reform and decline in newvehicle sales.Going forward,mild auto growth may continue to weighon full-year premium outlook(+8.5%in 2019E,CSe),in our view.Lack visibility of underwriting turnaround in the near-term,butvaluation undemanding.Regarding PICC P&C,investors are likelyto view 1Q results disappointing and the visibility of underwritingturnaround appears to be low in the near term.This,however,hasPrice(29-Apr-19,HK$)8.97Mkt cap(HK$/US$mn)199,518/25,438Number of shares(mn)22,243Free float(%)100.052-wk range(HK$)9.98-7.54ADTO-6M(US$mn)36.4Est.pot.%chg.to TP5.9Blue sky scenario(HK$)12.35Grey sky scenario(HK$)7.12Performance1M3M12MAbsolute(%)0.611.30.7Relative(%)(2.6)(0.1)4.6Year12/18A12/19E12/20E12/21ELife GWP(Rmb mn)0.00.00.00.0P&C GWP(Rmb mn)388,769421,824458,625500,997Net profit(Rmb mn)15,486.018,490.720,431.222,780.4EPS(CS adj.)(Rmb)0.70.830.921.02Chg.from prev.EPS(%)n.a.2.30.6(2.0)Consensus EPS(Rmb)n.a.0.91.01.09EPS growth(%)(21.8)19.410.511.5P/E(x)11.19.38.47.5NTA per share(Rmb)6.367.327.98.56EV per share(Rmb)-Dividend yield3.54.34.85.3P/B(x)1.211.050.970.9ROE(%)11.312.212.112.4P&C combined ratio(%)98.598.598.498.4Source:Company data,Refinitiv,Credit Suisse estimatesbeen largely priced in undemanding valuation of 1.03x P/B(12-monthforward),with 12%ROE and 4.3%dividend yield(2019E).PICCGroup needs to gradually lift its dividend to meet Ministry of Financesrequirement(minimum 30%payout vs 15%in 2018)in the future.Assuch,we believe dividend payout of PICC P&C should be sustainablegoing forward,as its parent PICC Group continues to heavily relies onPICC P&Cs upstream dividend,given P&Cs strong earnings capacitywithin the group.Figure 1:1Q19 results snapshotSource:Company data,Credit Suisse estimatesPICC P&Cs 1Q19 NPAT(standalone)declined 4%YoY to Rmb5.2bn,tracking29%/26%ofCSe/B