Citic’s Second-Quarter Results Reported Slowing Top-Line Growth on Weakening Credit Demands

No-moat China Citic Bank's second-quarter results reflected significant industrywide headwinds, including weakening credit demands, falling asset yields, and intense deposit competition. Six-month total revenue growth slowed to 2.7% from 4.1% year on year in the first quarter, dragged by an 8.9% contraction in the second-quarter fee income versus a 4% growth in the first quarter. Despite the weaker-than-expected top-line growth, six-month net profit growth at 12% year on year beat our expectation at a high-single-digit growth. This was attributable to lower credit costs as credit quality saw marginal improvement. We thus lower our 2022 credit costs assumption by 8 basis points, which was offset by lower fee income growth forecast by 6 percentage points, leaving our fair value estimate of CNY 5.20 per A-share and HKD 5.70 H-share unchanged.