Agricultural Bank of China (601288): Small and Micro Finances Have Prospects
The company’s recent situation On June 12-13, the Agricultural Bank of China held a 2019 reverse roadshow in Wenzhou, introducing inclusive finance, small and micro-lending and other field visits.
We believe that with the revitalization of the countryside, rural finance is still a potential blue ocean market. The demand for services such as deposits, loans, payments, settlement, and wealth management is indeed promising. Among the small and micro loans, the supply-side challenge may come from more preciseRisk identification and pricing.
Comment on the current external environment of the small and micro loan business previously.
1) Regulatory caliber adjustment.
The new regulatory caliber inclusive small and micro loan scale (9 trillion) is smaller than the past small micro-diameter (34 trillion), and most of them are characterized by small amounts of decentralization.
2) Preferential policies.
In 2018, the Bank’s long-term targeted directional accuracy reduction yielded 38 trillion yuan, and 4 trillion yuan was saved through expansion.
3) Technology empowerment helps to reduce the human expenditure of lending and risk control.
4) The information asymmetry of banks and enterprises has been eased, and the social credit system has been gradually constructed.
From a business sustainability perspective, the challenge comes from more precise risk identification and pricing.
1) ABC inclusive small and micro loan interest rate4.
63%, after considering policy preferences, we expect it to be 5.
If the future non-performing rate is flat at the current 2.
65%, which can basically protect the capital and make a small profit, but if the non-performing rate increases to 4% in the future risk exposure period, replacement may occur.
2) Uncollateralized property is one of the difficulties for farmers’ loans. Agricultural Bank of China launched Huinong e-loan in 2016, mostly online pure credit loans, with a current average of 170,000 yuan and a non-performing rate of 0.
33%, ABC plans to increase the proportion of future credit loans or raise higher requirements for risk identification.
3) The government will further improve credit enhancement and credit reporting, improve the credit environment, make breakthroughs in “data islands”, and set independent pricing within a certain range, which will help ensure business sustainability.
We estimate that the new inclusive loan customers of ABC are mainly black customers in rural counties.
When I discovered the Ruian Agricultural Service Center and other places, I noticed that after the Agricultural Bank of China increased the inclusive financial services in rural county areas, some customers of the original Agricultural Commercial Bank or credit cooperatives attracted low-interest rates to migrate to Agricultural Bank.Approved for credit.
It is estimated that the current Agricultural Bank A / H is trading at 0 respectively.
57x 2019e PB, maintain target price of 4.
7 RMB / 4.
77 destroyed unchanged, corresponding to 0 respectively.
85x 2019e P / B and 25/49% growth space, maintaining A / H recommendation level.
Agricultural Bank of China is the first bank to introduce in-depth financial services to capital markets, which will help 上海夜网论坛 ease market competition.
Risks in rural county areas are characterized by small amounts of scattered loans, short life cycles, and low risk resistance. Features such as higher exposure or expanding banks’ homeopathy