德意志银行-中国信用卡井喷？-中国银行业-20170830-Chinese banks：China’s credit card boom？-DeutscheBank

1、Deutsche BankMarkets ResearchAsiaHong KongBanking / FinanceBanksIndustryChinese banksDate30 August 2017Industry UpdateHans Fan, CFAJacky ZuoChinas credit card boom?JSBs reported strong revenue growth from credit cards in 1H17The eight joint-stock banks (JSBs) we cover have released 1H17 results and

2、itis worth noting that all of them reported faster growth in the credit cardbusiness. With receivable accelerating to 43% yoy and fees up 51% yoy, creditcard revenue has contributed 20% of JSBs revenue in 1H17 (2016: 16%). ThisResearch Analyst(+852 ) 2203 Edward DuResearch Associate(+852 ) 2203 Rese

3、arch Analyst(+852 ) 2203 partly explains the recent surge in Chinas short-term consumer debt, which isnow growing at 34-35% yoy (see report Chinas consumer debt boom). Thestronger credit card business should boost banks revenue in the near term,but it is unlikely to fully offset the deleveraging pre

4、ssure faced by JSBs, andthe asset quality and growth sustainability will be tested in coming years.What is driving this? Deleveraging pressure, policies, wealth effectOn the supply side, we view the strong credit card growth as a result of a shiftin JSBs business focus when they are subject to risin

5、g earnings and capitalpressure from financial deleveraging (see our reports Rising funding pressure,Series I, II, III and IV). Being more wholesale-funded and more exposed toshadow banking, JSBs recorded NIM compression (Figure 6) and notable assetgrowth slowdown or even shrinkage in 1H17 (Figure 7)

6、. To offset thedeleveraging pressure, JSBs stepped up efforts to promote a better-margincredit card business. Policy wise, this is also supported by governmentsinitiative to promote inclusive financing. On the demand side, consumerconfidence has surged to a ten-year high (Figure 11) and our China ec

7、onomistteam argued that this was driven by the wealth effect of a property bubble (seereport Chinas consumption boom? dated 25 Aug 2017).Stephen Andrews, CFAResearch Analyst(+852 ) - 2203 6191stephen-Top picksICBC (1398.HK),HKD5.93Bank of China (3988.HK),HKD4.10Source: Deutsche BankCompanies Feature

8、dICBC (1398.HK),HKD5.93China Construction Bank(0939.HK),HKD6.98Agri. Bank of China (1288.HK),HKD3.70Bank of China (3988.HK),HKD4.10Bank of Communications(3328.HK),HKD5.98BuyBuyBuyBuyBuyBuyBuyIs this a game changer for joints-stock banks? Asset quality and sustainabilityThe short answer is, probably

9、not yet. Indeed stronger credit card businessboosts the revenue for JSBs and relieves their pressure amid deleveraging tosome extent in the near term. Yet, given such strong growth, we are notentirely sure that the banks maintained strict underwriting standards andmonitored the uses of funds properl

10、y. The eight JSBs issued 40 m new creditcards in total in just six months (up 58% yoy), which already exceeded the totalnew credit cards for the full year of 2016 for all of China. While the NPL ratiostayed low (1.77%), the regulator has warned about the potential risks relatedChina Merchants Bank H

11、old(3968.HK),HKD28.90China CITIC Bank (0998.HK),HKD5.11 HoldChina Minsheng Bank (1988.HK),HKD7.80 HoldCEB (6818.HK),HKD3.80 SellChongqing Rural Bank (3618.HK),HKD5.87 HoldHuishang Bank (3698.HK),HKD3.91 SellBank of Chongqing (1963.HK),HKD6.56 SellShanghai Pudong Bank Hold(600000.SS),CNY12.95to credi

12、t card instalment loans. For example, in the past months, the CBRC hasimposed fines on some banks regarding lending to unqualified borrowers andlack of proper post-lending monitor (Figure 17). Another issue is that thesustainability may be questionable. As the recent consumption boom wasmainly drive

13、n by wealth effect from property bubble, the credit cardmomentum may soften if property price in China starts to flatten or drop.Ping An Bank (000001.SZ),CNY11.67Industrial Bank (601166.SS),CNY18.22Bank of Beijing (601169.SS),CNY7.72Bank of Nanjing (601009.SS),CNY8.25Bank of Ningbo (002142.SZ),CNY16

14、.17Source: Deutsche BankHoldSellBuySellSellHow to position? We still recommend adding big banks ahead of resultsNet net, we expect JSBs to continuously be subject to earnings and capitalpressure, as they remain wholesale funded and their shadow banking exposureis still high. The short-term boost in

15、credit card business is not enough to offsetthe negative impact. By contrast, we prefer big four banks and recommendadding them ahead of results (see our report Better earnings quality shoulddrive big banks re-rating dated 15 Aug 2017). We forecast big banks toachieve around 10% PPoP yoy growth in 2

16、Q17 post one-off gains. Top picksremain ICBC and BOC.We value Chinese banks using a three-stage Gordon Growth Model (PV= (ROE-g)/(COE-g), with target prices based on2017E book values. Downside risk:property price correction. Upside risk:removal or softening of GDP targeting._Deutsche Bank AG/Hong Ko

17、ngDistributed on: 29/08/2017 21:41:19 GMTDeutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors shouldbe aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors shouldconsider this report as

18、only a single factor in making their investment decision. DISCLOSURES AND ANALYSTCERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 083/04/2017.0bed7b6cf11c30 August 2017BanksChinese banksCredit card boomStrong growth in JSBs credit card businessThe eight joint-stock banks (JSBs) we cover have releas

19、ed 1H17 results. It isworth highlighting that all of them reported faster growth in credit cardbusiness. The eight JSBs have extended the Rmb1tr new credit card limit(including undrawn limit) in 1H17, which has more than doubled from 1H16(Figure 1). They recorded that accelerating growth in credit c

20、ard receivablesbalanced up by 43% yoy in 1H17 (Figure 2), which accounted for 10.3% oftheir loan balance (versus 4% for the China banking system).We summarize JSBs credit card business in Figure 3 we estimate credit cardrevenue, mainly including credit card loan interest, instalment fees andmerchant

21、s fees, accounted for 20% of total revenue in JSBs, up from 16% in2016. Among JSBs, CEB recorded the highest contribution of 28%.Figure 1: JSBs recorded strong growth in credit cardreceivableFigure 2: Credit card receivable contributed higherportion of loan bookRmb bnTotal new credit card limit exte

22、nded by JSBsJSBs credit card receivable balance yoyNew credit card receivablesNew undrawn credit card limits55%1,20053%1,00098450%80045%43%60041746963832659140%42%37%400200-2751531221H132921351572H132721601121H142851161702152301872H152891801H163122H163931H1735%30%25%2H131H1435%2H141H153

23、3%2H1529%1H1634%2H161H17Source: Deutsche Bank, company dataNote: JSBs here include BoCom, CMB, CNCB, MSB, SPDB, INDB, CEB and PAB (eight banks)Source: Deutsche Bank, company dataNote: JSBs here include BoCom, CMB, CNCB, MSB, SPDB, INDB, CEB and PAB (eight banks)Figure 3: Summary of JSBs credit card

24、business in 2016/1H17Credit card revenueAs % ofAs % ofCredit card receivable balanceRmb mnBoComCMBCNCBMSBSPDBINDBCEBPABJSBs average201625,86243,61225,50423,07021,66711,87122,23919,25424,1351H1712,62725,69516,59912,81521,8657,78312,97010,52915,1101H17 yoy16%24%50%21%94%58%35%23%38%totalrevenue -20161

25、3%21%17%15%13%8%24%18%16%totalrevenue -1H1712%23%22%18%26%11%28%19%20%2016307,857409,198237,712207,372267,119110,330212,326181,085241,6251H17347,610456,219302,527246,998379,262137,587247,728207,959290,7361H17 yoy21%34%52%37%120%58%29%28%43%As % oftotal loans -20167.5%12.5%8.3%8.4%9.7%5.3%11.8%12.3%9

26、.3%As % oftotal loans -1H178.0%12.9%9.8%9.1%12.5%6.0%12.6%13.0%10.3%Source: Deutsche Bank estimates, company dataNote: JSBs here include BoCom, CMB, CNCB, MSB, SPDB, INDB, CEB and PAB (eight banks); CMB is the only bank to have classified installment fees as interest income for credit card business.

27、We use the same interest rate as CNCB to estimate other banks credit card interest income.Page 2Deutsche Bank AG/Hong Kong2%0%30 August 2017BanksChinese banksThis partly explains the recent surge in Chinas short-term consumer debt,which is now growing at 34-35% yoy and makes up close to 9-10% of all

28、 newcredit creation in China (see report Chinas consumer debt boom dated 17 Aug2017). In this report, we provide our initial thoughts to two questions: 1) Whatis driving this? 2) What are the implications for banks?Figure 4: Rolling three month absolute growth in Chinashort-term consumer debt (RMB m

29、)Source: Deutsche Bank, PBOCWhat is driving this?A shift in business focus to offset deleveraging pressureFigure 5: Short-term consumer debt as percentage ofChinas total net new credit growth has reached 9-10%(rolling three-month basis)Source: Deutsche Bank, PBOC, CEICFacing the financing deleveragi

30、ng pressures (see our reports Rising fundingpressure, Series I, II, III and IV), we believe JSBs strategically shifted businessfocus to the credit card business in order to support earnings. Given heavyreliance on wholesale funds, JSBs saw significant NIM pressure after centralbanks pushed up market

31、 rates, as shown in Figure 6. At the same time,reflecting capital pressure on shadow banking exposure, JSBs were forced toslow down asset growth. Three JSBs (CNCB, CEB and MSB) actually recordedshrinking assets on a qoq basis in 2Q17, and they mainly scaled backinterbank assets and shadow banking cr

32、edits, as shown in Figure 7.Figure 6: Most JSBs saw significant NIM down tendsince 2015, except for CMBFigure 7: Three JSBs reported shrinking assets in 2Q17NIM - JSBs5%Assset qoq chg - 1Q17Assset qoq chg - 2Q172.90%4%3%4%2.70%2.50%3%2%3%2%2%3%2%1%1%2.30%2.10%1.90%1%0%(1%)1%(2%)(2%)1.70%1.78%(3%)(2%

33、)1.50%(4%)(3%)(3%)CMBPABBoComCNCBCEBMSBSPDBINDBSource: Deutsche Bank, company dataNote: JSBs here include BoCom, CMB, CNCB, MSB, SPDB, INDB, CEB and PAB (8 banks)Source: Deutsche Bank, company dataNote: JSBs here include BoCom, CMB, CNCB, MSB, SPDB, INDB, CEB and PAB (8 banks)Deutsche Bank AG/Hong K

34、ongPage 30.00.51.01.52.02.53.03.5USHong KongCanadaKoreaSingaporeAustraliaUKSwedenBrazilSwitzerlandTurkeyItalyChinaFranceMexicoBelgiumRussiaNetherlandsGermanyIndiaparties30 August 2017BanksChinese banksCredit card is still underpenetrated in ChinaWe believe the credit card business is still underpene

35、trated in China, and it istoo early to be concerned about the systemic risks. According to BIS data,credit card per capita in China was only 0.3, much lower than 3.1 for US, 2.6for HK and 0.9 for UK (Figure 8). In addition, credit card balance in Chinacurrently only accounted for 4% of total loans,

36、versus 8% in Korea and US in2016 (Figure 9). As a reference, before the 2003 credit card crisis in Korea,credit card balance was as high as 14.6% of total loans, with a large balancecoming from credit card companies lacking in risk management abilities. Incontrast in China, there are no independent

37、credit card companies runningnow, and several applications from JSBs for setting up credit card subsidiariesare still pending for approvals.Figure 8: Still low credit card penetration in China versusmatured marketsCredit card per capita - 2015Figure 9: Credit card balance in China was far from thecr

38、edit card crisis level in Korea before 2003Credit card as % loans - 20163.116.0%14.6%2.614.0%2.0 1.8 1.712.0%10.0%1.0 0.9 0.9 0.8 0.7 0.78.0%7.7%8.0%0.4 0.3 0.3 0.2 0.2 0.2 0.2 0.1 0.06.0%4.0%2.0%0.0%3.9%ChinaKoreaUSKorea - 2001Source: Deutsche Bank, BISJSBs stepped up efforts in promoting credit ca

39、rd businessSource: Deutsche Bank, CEIC, PBOCOperationally, we note two major trends in JSBs credit card businessdevelopment recently, including: (1) application of innovated technology and (2)cooperation with third party partners. We summarize their strategy in thebelow table.Innovated Technology: d

40、ifferent from direct/telephone marketing a fewyears ago, banks currently focus more on new tech development forclient acquisition, i.e. CMB provides comprehensive financing servicesfor its credit card clients via App. Other new technologies, like big datafor efficient client data analysis, AI Robot

41、for investment advisory,voice/face recognition for security enhancement and etc., have helpedaccelerate overall operational processes and provide better interfaceand user-experience for customers.Cooperation with thirdthird parties: This is a general operation model forbanks. We have seen many banks

42、 in the past cooperate with airlinecompanies, oil and gas companies and internet companies for co-branded cards.Page 4Deutsche Bank AG/Hong Kong025951051152009-072011-012016-0130 August 2017BanksChinese banksFigure 10: Major JSBs credit card development strategyBankCMBCITICCEBBoComPABMSBStrategy- Pu

43、shing forward credit card via fintech, banking App (CMB Life) to build up a user-friendlyfinancing platform- Providing turnkey solution financing platform via big data, voice/face recognition- Mega partnership with enterprises enabled the bank to jointly construct comprehensive servicecovered all co

44、nsumption scenarios of the users, covering daily life, entertainment, sports, healthand culture, etc- Carried out the cross-sector cooperation with premium internet companies andissued co-branded cards in a bid to build a multi-dimensional product system- Taking advantage of internet resources and b

45、ig data technology to expand customer base- The first to launch the innovative “mobile-based credit card” characterized by quick and efficientservice- Cooperated with HSBC on credit card business- Optimizing credit card service system, providing differentiated services to each client segment- Optimi

46、zing on/off line application process, combining channels and platforms to providecomprehensive services by leveraging on Ping Groups resources- Maintain market-oriented operation and pursue innovation- Various discount offers were given to customers, including instant rebates for certain purchaseamo

47、unts at Carrefour, lucky drawsKey products1. Consumption finance product“E-CMB-Loan (E招貸)”2. E-Flash-Loan (e閃貸)3. A number of co-brand cards1. “CITIC Fly Punctual” co-branded card2. “CITIC Car Owner” credit card3. FIFA2018 World Cup theme credit card4. CITIC “Color Cards”1. co-branded cards2. credit

48、 card APP3. Launch of new payment function by scanning QR code and couponissuance1. quick loan service2. co-branded card with IQIYI, Youku, Zuzuche3. App Go Pay3. Mobile-based credit card1. Discount for refueling2. Cashback in overseas consumptions1. JD Xiao Bai Card2. Tongdao Dashu Horoscope Co-bra

49、nded Card3. Huaqiangu Co-branded Card4. China-resources Co-branded CardSource: Deutsche Bank, Company dataWealth effect from property bubble boosts the consumption sentimentOn the demand side, consumer confidence has surged to a ten-year high(Figure 11) and our China economist team argued that this

50、was driven by thewealth effect of a property bubble (see report Chinas consumption boom?dated 25 Aug 2017). As shown in Figure 12, we compared the paper wealththat the property bubble created to Chinese urban households and theirdisposable income from their jobs. In 2016, the ratio rose to 3.7 for t

51、ier-1 cities,2.1 for top tier-2 cites and 1.2 for satellite tier-3 cities.Figure 11: Consumer confidence reboundedFigure 12: The property bubble created huge paperwealth in some citiesConsumer confidence indexDisposable income of urban households, quarterly, ytd yoy%, rhs%Wealth gain from propertypr

52、ice appreciation /Disposable income2011 2012 2013 2014 2015 20161101002015105Tier 1 (4)Top tier 2 (15)Bottom tier 2 (18)Satellite tier 3 (24)Non-satellite tier 3 (32)0.00.0-0.2-0.1-0.4-0.6-0.4--0.30.0-0.51.2-0.22007-012007-072008-012008-072009-01

53、 2010-012010-07 2011-072012-012012-072013-012013-072014-012014-072015-012015-07 2016-072017-01Source: Deutsche Bank China Economist team, WINDWhat are the implications on banks?Source: Deutsche Bank China Economist team, WINDNote: For details of the table, please refer to Chinas indispensable proper

54、ty bubble issued on 17 Mar2017.In the near term, the stronger credit card business should boost the revenuefor JSBs and relieve their pressure amid deleveraging to some extent in thenear term.Deutsche Bank AG/Hong KongPage 51.2%30 August 2017BanksChinese banksHowever over the longer run the asset qu

55、ality and growth sustainability willlikely be tested. Given such strong growth, we are not entirely sure that thebanks maintained strict underwriting standards and monitored the uses offunds properly. The eight JSBs we covered have issued 40 m new credit cardsin just six months in 1H17 (up 58% yoy),

56、 which already exceeded the totalpopulation of Canada (Figure 13). Apart from the strong growth in clientacquisition, JSBs also increased the credit limit per card (Figure 14).Figure 13: The eight JSBs have issued 40 m new creditcards in 1H17, equivalent to the population of CanadaFigure 14: They al

57、so increased the credit limit per card in1H17Million45.0Number of new credit cards issued by JSBsRmbCredit limit per card40.035.039.730,00025,0001H162H161H1730.025.129.020,00025.021.920.015,00020.016.817.615.010.05.012.311.514.110,0005,0000-BoComCMBPABCITICMSBCEBIndustrialSPDB2H121H132H131H142H141H1

58、52H151H162H161H17Source: Deutsche Bank, Company dataSource: Deutsche Bank, Company dataWhile the NPL ratio stayed low (1.77%, Figure 15), the regulator has actuallywarned the potential risks related to credit card instalment loans. For example,over the past months, the CBRC has imposed fines on some

59、 banks regardinglending to unqualified borrowers and lack of proper post-lending monitoring(Figure 17). Meanwhile, the media reported that some borrowers used the cashfrom credit card instalment loans to invest in the equity and property markets.Figure 15: Industry credit card NPL ratio was at 1.77%

60、 asof end-2016Figure 16: JSBs credit card NPL ratio3.00%Industry Credit Card NPL Ratio2.5%JSBs credit card NPL ratio2016 1H172.50%2.0%2.0%2.0%2.00%1.50%1.00%0.50%0.00%1.77%1.5%1.0%0.5%0.0%1.4%1.3%1.5%1.3%1.1%0.8%1.4%1.2%1.7%1.4%1.3%2007200820092010201120122013201420152016CMBCITICCEBPABBoComIndustria