PAB reported decent 1Q20 PPoP/net profit growth of 19.4%/14.8% YoY.Healthy credit expansion, stable NPL ratio, and better operating efficiency werekey positives. 1Q20 NIM narrowed 2bp QoQ, but should outperform peers onresilient loan pricing and higher proportion of market-based funding. Down 21%YTD (vs -11.6%/-5.9% for A-share banks/CSI 300 Index), the Bank appeared tobe over-penalized for above-peers exposure to consumption related loans.Despite temporary fluctuation in retail NPLs, PAB is likely among the first towalk out of this credit down-cycle as we expect corporate loan quality to be wellmanaged.
Results positives: 1) Loan growth was robust at 5.2% QoQ vs 4.6% QoQfor system loans. Corporate loan growth accelerated to 11.4% QoQ onpolicy stimulus, while retail loans were muted (+0.8% QoQ) on subduedconsumption activities amid COVID-19’s outbreak. 2) Investment gainpicked up 47.9% YoY, as PAB increased bond portfolio during monetaryloosening. 3) 1Q20 cost-income ratio fell 1.