Industrial Bank Earnings: Lower Costs Fuel Earnings Growth; Fair Value Estimate Up 5%

We increased our fair value estimate for Industrial Bank, or CIB, to CNY 19 per share from CNY 18.10 following better-than-expected interim profit that showed well-contained costs. While our estimates price CIB at 0.5 times 2024 price/book and 6% dividend yield, which is undemanding on a regional basis, we note that most China banks are trading in this range, and we believe the bank is fairly valued. CIB’s share price has underperformed major joint-stock bank peers year to date as investors remain concerned about its credit quality, in light of relatively greater property exposure and debt investments. We believe the credit risk is factored in, but upward rerating requires an improved credit quality outlook.