5 signs that ICBC will outperform in 2013

It has defensive profitability and pricing power.

According to Barclays, the first sign is that ICBC is demonstrating strong defensive profitability and pricing power. It has a strong treasury business, which helps increase its investment yield and in turn helps mitigate the negative impact of a decline in loan yields.

The bank’s NIM slightly declined q/q in  1Q13, one of the best performances among its peers. We expect the bank to deliver another solid set of results for full-year 2013.

Here are the other 4 signs from Barclays:

• ICBC has a strong deposit franchise: its demand deposits accounted for 49% of total deposits at end-March 2013, one of the highest levels among peers. It also had a lowerthan-peers LDR of 64% as of end-1Q13, which we believe will be a key support for the bank’s future growth.

• ICBC has little need to raise equity, in our view, owing to its internal profit accumulation and lower-than-peers risk-weighted asset (RWA) growth.

According to management, new capital rules will likely have a neutral impact on ICBC’s capital position, and the bank will look for new capital tools to enhance its capital level if the regulator allows.

• Its leading IT infrastructure positions the bank well for business growth, risk management and product innovation, in our opinion.

• ICBC has a clear overseas expansion plan, with 252 overseas branches in over 30 countries as of 2012. The bank’s target is to lift the overseas subsidiaries’ profit contribution to 10% of the group’s total profit before tax within the next 3-5 years, from the current level of 4%.