CITIC Bank's net profit surged 13.4% to RMB30.9b

Boosted by strong fee income growth.

According to CCB International, CITIC Bank reported 9M13 net profit of RMB30.9b, up 13.4% YoY, 3% above consensus.

Growth was driven by strong fee income growth of 51.9% YoY. Annualized ROE and ROA were 19.2% and 1.31%, respectively. CITIC’s ROE is still lower than comparable peers.

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NIM stabilized at the low level of 2.60%. The impact of rate cuts in 2012 to NIM has worn off. CITIC’s deposit growth held strong even after interest rate liberalization, which grew 16.7% YTD, much higher than the industrial average of 12.3% YTD.

Normalization of credit costs is positive to the market. In order to meet the CBRC’s 2.5% LLR/loan ratio requirement, CITIC’s credit costs spiked in 3Q12 and 4Q12, reaching 102bp and 156bp on an annualized basis.

Since then, credit costs have normalized to 63bp in 3Q13 and 57bp in 9M13, effectively eliminating the earnings growth overhang.

Interbank activities accelerated in 3Q13 – not a good sign. The bank’s investment receivables surged RMB56b or 40% QoQ, due to its investment in trust beneficiary rights (TBR). CMB has acted in similar fashion, moving its TBR from “financial assets under resale agreement” to “investment receivables”.