Ping An Bank Earnings: Mounting Revenue Pressure Due to Business Restructuring and De-Risking

Despite a slightly better-than-expected 2.3% year-on-year first-quarter net profit growth, Ping An Bank, or PAB, posted a sharp 14% decline in revenue. We retain our CNY 12 per share fair value estimate as overall results were largely in line. We expect PAB will continue to see larger-than-peer revenue pressures until 2025, as management expects PAB’s de-risking and restructuring exercises to be completed by then. While we expect net profit growth to be around 1% in 2024, we anticipate a smaller revenue contraction in the second half as the impact from a higher base in first-half 2023 normalized. We expect PAB should be able to maintain a 30% dividend payout ratio in 2024 to support its share price thanks to a solid capital ratio boosted by the new capital rules and a relatively high provision coverage ratio to smooth earnings growth. In light of uncertainties during PAB’s business transition, we prefer China Construction Bank, Industrial and Commercial Bank of China, and China Merchants Bank on higher earnings visibility and stable dividends.