BoCom’s 2021 Results Benefited From Fast-Growing Wealth Management Business, Credit Quality Improved

We retained our A-share fair value estimate at CNY 5.50 per share and H-share fair value estimate at HKD 6 per share after no-moat Bank of Communications, or BoCom's 2021 results. The results highlighted a rebound in net interest margin, or NIM, strong fee income growth, and improved credit quality. Total revenue growth was in line, which accelerated by 1.6 percentage points to 9.4% from 7.8% for the first three quarters. Growth in pre-provisioning operating profits, or PPOP, slowed to 9.2% from 11.4% in the first three quarters on increased operating expenses and the expiration of tax relief for employee social insurance expense in 2021. However, the 11.9% year-on-year net profit growth slightly exceeded our expectation for a high-single-digit growth, due to higher-than-expected reduction in credit costs.