PAB Reported Strong net Profit Growth Despite Contraction in fee Income

We reduced our fair value estimate for Ping An Bank, or PAB to CNY 22 from CNY 24 per share, corresponding to 1.1 times forward P/B, after downward revisions to our 2022 fee income forecast by 8% and net interest margin, or NIM, by about three basis points to reflect weak consumer confidence and volatile capital market movement in the near term. PAB’s first-half results were mixed. PAB’s total revenue growth was resilient despite challenging market conditions. The 8.7% year-on-year growth was largely on track to match our 10% full-year growth assumption. However, the second-quarter fee income was disappointing, contracting 19.5% year on year on volatile capital market movement and growing concerns of property market risks. The six-month net profit grew 25.6% year on year on lower credit costs and improved operating efficiency. Such growth was ahead of the 21% iFinD consensus and our projected growth at high-teens for the full year of 2022.