CCB 2014 net profit jumps 6.1% y/y to RMB227.8b

But its asset quality slightly deteriorated.

China Construction Bank (CCB) reported 2014 net profit of RMB 227.8bn (6.1% y/y), 1.3% lower than Bloomberg consensus.

According to a research note from Barclays, the bank’s pre-provision operating profit grew by 11.7% y/y in 2014, mainly driven by solid net interest income (+12.3% y/y) and efficient cost control (operating expenses only grew by 4.1% y/y).

Net profit in 4Q14 was RMB 37.5bn, -1.7% y/y; the negative y/y growth in 4Q14 was mainly attributable to higher impairment charges of RMB 22bn, (+27% y/y), corresponding to a credit cost of 93bps (+11bps y/y and 24bps q/q).

Here's more from Barclays:

Asset quality slightly deteriorated - CCB’s NPLs amounted to RMB 113bn as of end-4Q14, up 7% q/q. In the meantime, NPL ratio reached 1.19%, up 6bps q/q and 20bps y/y.

The mild increase in NPLs and NPL ratio is likely a result of higher amount of write-offs and NPL disposal, in our view.

It is worth noting that CCB consolidated Brazilian bank Banco Industrial e Comercial S.A. in 3Q14, which contributed to about +6bps in full year NPL ratio increase.

Excluding BIC’s impact, CCB’s NPL ratio grew by 14bps y/y in 2014, according to our calculations.

Sequential NIM declined - For full-year 2014, CCB’s NIM was 2.80%, +6bps y/y. However, under our calculation, its 4Q14 NIM narrowed by 6bps q/q to 2.79%.

We expect CCB’s NIM to be under further downward pressure in consideration of the two benchmark rate cuts in Nov-14 and Feb-15.

Very strong capital position - CCB’s capital position remained very solid, with core tier 1, tier 1 and total CAR reaching 12.12%, 12.12% and 14.87% at end-4Q14, up 47bps, 47bps and 34bps respectively.

The bank’s tier 1 capital could be further boosted by more than 50bps with the issuance of the proposed RMB 60bn preference shares.

Despite the strong capital position, CCB cut its dividend payout ratio to 33% for 2014 from 35% in 2013, in line with its large peers.