ICBC's 1Q15 net profit sneaks up by 1% to RMB74b

It experienced slower fee income growth partly.

Industrial & Commercial Bank of China Ltd. reported net profits of RMB 74bn for 1Q15, +1% y/y, slightly below Barclays' expectation due to slower fee income growth and higher impairment charges.

According to a research note from Barclays, margins were under pressure after the two benchmark rate cuts and management expects further repricing pressure going forward.

The NPL ratio increased by 16bps to 1.29%, as retail & wholesale and manufacturing sectors continued to deteriorate, although ICBC plans to write off more NPLs in future.
Management believes it would benefit from the "One Belt One Road" national strategy, leveraging on its global network, especially in less developed economies.

Here's more from Barclays:

Low fee income and higher credit cost drag down profit growth: ICBC's net interest income grew by 8% y/y while net fee income fell by 1%, likely due to the implementation of lower fee scheme imposed by the regulator since October 2014. Impairment charges increased by 51% y/y and credit cost rose to 0.74% , + 20bps y/y but down -14bps q/q. Consequently, net profits grew by only 1% y/y to RMB 74bn.

NIM pressure after rate cuts: ICBC's NIM in was 2.60% in 1Q15, flat y/y and down by 6bps from the level for 2014, reflecting the two rate cuts by the PBOC, which the bank estimates should lower its NIM by 12bps on a full-year basis. During 1Q15, around 40% of repricing impact from the two rates has materialised and the bank expects NIM to continue to decline gradually from 2Q15 onwards.

Asset quality remains under pressure; more disposals to come: ICBC's NPL ratio increased by 16bps q/q to 1.29%. In 1Q15, the bank disposed of RMB 30.7bn NPLs, of which RMB 15.1bn or 49% were write-offs (+100% y/y).

Retail & wholesale and manufacturing continued to be sectors driving new NPL formation, contributing 53% of the total NPL increase in 1Q15. More mid-sized companies began to generate NPLs in 1Q15, and the bank plans to write off more NPLs going forward.