Minsheng net profit below market expectations

PUBLISHED : Saturday, 19 January, 2013, 12:00am
UPDATED : Saturday, 19 January, 2013, 5:12am

China Minsheng Banking fell short of analysts' expectations in its full-year results yesterday.

Despite signs of a pick-up in the economy, the mainland's largest non-state lender posted a net profit of just 37.6 billion yuan (HK$46.8 billion) last year, slightly below the average market projection of 34.13 billion yuan, though it exceeded the 27.9 billion yuan seen in 2011.

The bank's operating income climbed more than 25 per cent to 103.1 billion yuan and the return on equity, a measure of profitability, rose 129 basis points to 25.24 per cent for the same period.

Minsheng, the ninth largest Chinese lender by assets, has focused on loans to small and medium-sized private companies, keeping away from large state-owned enterprises that enjoy cheap funding from big banks. Government-controlled financial institutions prefer to issue loans to state-owned enterprises as they share the same parent shareholder, the State Council.

Minsheng's non-performing loan ratio rose 13 basis points to 0.76 per cent but it did not disclose its net interest margin, which measures the spread between funding costs and lending income.

Analysts said Minsheng had fewer non-performing loans than larger banks but the deterioration of its asset quality remains a concern.

Ming Tan, an analyst at Jefferies, said a rise in non-performing loans and provisions was among the key risks in Minsheng's balance sheet, while concerns over capital adequacy levels would persist if the bank fails to issue long-planned convertible bonds in Shanghai.

Minsheng raised HK$11.2 billion in a Hong Kong share sale last February to boost capital and improve its balance sheet.

The bank has said it plans to issue up to 20 billion yuan of convertible bonds in Shanghai.

It had a tier-1 core capital ratio - a comparison between a bank's core equity capital and total risk-weighted assets - of 8.41 per cent in the first half of last year. It is required to reach at least 8.5 per cent by 2016.

Shares in Minsheng hit a 52-week high yesterday, driven on optimism that the lender has completed the process of repricing existing loans with small private firms.