Postal Savings Bank of China: Fee Income Growth Leads Peers, H-Shares Still Attractive

No-moat-rated Postal Savings Bank of China's, or PSBC's, first-quarter results surprised with a 27.5% year-on-year increase in fee income, slightly exceeding our expectations. Net interest income was resilient, growing 1% year on year, indicating a decent improvement from the 0.5% decline in fourth-quarter 2022, despite significant pressures brought by loan repricing. Overall, we think the results are largely in line with our expectations and reaffirm our thesis that PSBC should benefit from the strong growth potential given the underserved financing demands in rural areas despite the challenging market environment. Our fair value estimates of CNY 5.70 for A-shares and HKD 6.50 for H-shares are unchanged, and we think the H-shares remain undervalued, trading at 0.6 times 2023 price to book value.