Ge Long Hui·2025-08-01 19:41Core Viewpoint - The investment community should not overlook the proactive measures taken by the management of CITIC Bank, which has shown early signs of improvement in asset quality, asset structure, and return on equity (ROE), despite ongoing industry pressures. The current valuation presents an opportunity for a premium due to the certainty of these improvements [1]. Group 1: Asset Quality and Risk Management - CITIC Bank has focused on early and thorough exposure of non-performing assets (NPAs), transitioning from a "correction period" to a "health phase." The bank's non-performing loan (NPL) generation rate from 2018 to 2020 was 1.55%, higher than the industry average by approximately 10 basis points [2]. - The bank has written off a total of 239 billion from 2018 to 2021, exceeding the total from 2013 to 2017, leading to a peak in corporate real estate NPLs in 2021, which have since declined [2]. - As of Q1 2025, the NPL ratio has decreased to 1.16%, with a stable NPL generation rate of around 0.9% and a provision coverage ratio of 207%, marking a ten-year high [2]. Group 2: Financial Performance and ROE - CITIC Bank's ROE has stabilized and is expected to continue leading the industry, supported by a shift in loan structure that emphasizes infrastructure and emerging sectors, with a significant reduction in real estate loan ratios [3]. - The bank's net interest margin (NIM) has shown resilience, with a projected decline of only 28 basis points from 2021 to 2024, compared to a 60 basis point decline for peers [3]. - The bank's average daily corporate demand deposits account for 37.5% of total deposits, which is approximately 10 percentage points higher than the industry average, indicating a favorable deposit structure [3]. Group 3: Strategic Management and Future Outlook - The advantages of CITIC Bank's transformation and stable balance sheet are attributed to the resources of CITIC Group, which provides a collaborative advantage and supports credit pricing stability [4]. - The bank's core Tier 1 capital adequacy ratio stands at 9.45%, exceeding regulatory requirements, and the capital position is expected to support up to 1.8 trillion in lending [4]. - The management's strategic focus since 2019 on "burden reduction," "stable interest margins," and "customer acquisition" has yielded significant results, with a new leadership team expected to bring fresh perspectives in the upcoming three-year plan [5].