ICBC Earnings: Revenue Headwinds Greater Than Peers; Credit Quality Stable

Industrial and Commercial Bank of China’s first-quarter performance was largely within expectation. Total revenue declined 1% year on year, driven by the 5% and 3% respective contractions in net interest income and fee income, while net profit was flat year on year. We leave our main assumptions and our fair value estimates of CNY 4.60 for the A-shares and HKD 5.00 for the H-shares unchanged. As with its peers, ICBC is trading at a historically low 0.4 times 2023 price/book value. However, while we think ICBC will continue to benefit from its strong deposit franchise and operating efficiency, we currently have a preference for Agricultural Bank of China and China Construction Bank, if among the state-owned banks; and for China Merchants Bank and Ping An Bank, as we anticipate fee income growth to strengthen in second-half 2023.