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Detailed Information
Business Description
AS OF 24 May 2024- AGRBK has surpassed CCB to become the second-largest bank in China in terms of total assets and has been moved from bucket 1 to bucket 2 in the G-SIB list with a capital surcharge of 1.5%.
- It was founded in 1951 as the Agricultural Cooperative Bank, merged with the central bank and spun out as AGRBK in 1979, charged with financing the rural and agricultural sectors. It was recapitalised in 1999 and again in 2007 by special MOF bonds. It also received $19 bn in equity capital from Huijin, funded by China's FX reserves.
- Due to its poorer asset quality and weaker profitability, AGRBK was the last of the Big 4 banks to be listed in 2010.
- The Chinese government is a majority shareholder of AGRBK via Central Huijin (40.14%), MOF (35.29%) and the Social Security Fund (6.72%).
- AGRBK has the second largest branch network in China after Postal Bank, with a particularly good presence in rural areas.
Risk & Catalysts
AS OF 24 May 2024- China’s sovereign ratings (A1(neg)/A+(stb)/A+(neg)) are a key factor behind AGRBK’s credit standing.
- AGRBK’s loan growth has been the strongest among the Big 5 banks since FY22, but the impact on net interest income growth was largely offset by a significant contraction in NIM. Rapid loan growth has led to a widened capital ratio differential between AGRBK and other Big 4 banks. It was promoted to a Bucket 2 G-SIB in Nov-23 and currently has a substantial TLAC shortfall to meet by 1 January 2025 and 1 January 2028. It plans to issue up to RMB 50 bn of TLAC notes this year.
- AGRBK is managed on commercial terms but the government may call on it to perform “national service” that overrides profitability considerations. However, we do not see it as a clear credit negative as these actions reflect close state links that underpin ABC’s credit standing.
Key Metric
AS OF 24 May 2024| RMB bn | FY20 | FY21 | FY22 | FY23 | 1Q24 |
|---|---|---|---|---|---|
| PPP ROA | 1.65% | 1.64% | 1.43% | 1.20% | 1.32% |
| Reported ROA | 0.83% | 0.86% | 0.82% | 0.73% | 0.69% |
| Reported ROE | 11.4% | 11.6% | 11.3% | 10.9% | 11.4% |
| Total Equity/Total Assets | 8.1% | 8.3% | 7.9% | 7.2% | 7.1% |
| CET1 Ratio | 11.0% | 11.4% | 11.2% | 10.7% | 11.4% |
| NPL Ratio | 1.56% | 1.43% | 1.37% | 1.33% | 1.32% |
| Credit Costs | 1.16% | 1.03% | 0.79% | 0.64% | 0.96% |
| Loan-Deposit Ratio | 74% | 78% | 79% | 78% | 77% |
Credit costs are calculated using provisions divided by average loans
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