Bocom’s Q2 Reported Strong Loan Growth; Contraction in NIM Was Milder Than for Peers

In line with peers, Bank of Communications', or Bocom's, first-half 2022 result continued to show profitability growth, but weaker economic conditions led to net profit growth decelerating in the second quarter. First-half total revenue was up 7.1% against the same period last year while higher credit cost and operating expense led to net profit increasing at a slower pace of 2.9% to CNY 44.1 billion, missing our expectation for a mid-single-digit increase. The slowing revenue growth was attributable to a larger-than-expected year-on-year contraction in second-quarter fee income of 11% on a 18% decline in bank wealth management income, versus a 9% increase in first-quarter total fee income. We have reduced our 2022 fee income growth forecast by 2 percentage points, but the change is not enough to move our valuation.