Event: on March 29, Wuxi Bank released its 2022 annual report. In 2022, the revenue was 4.48 billion yuan, the net profit of YoY+3.0%; was 2 billion yuan, the defect rate of YoY+26.7%; was 0.81%, and the provision coverage rate was 553%.
The middle income has achieved relatively rapid growth, and the profit growth rate has risen from the previous month. By the end of 2022, the cumulative year-on-year growth rate of revenue (the same below) decreased 3.6pct compared with 22Q3, on the one hand, the negative growth rate of net interest income is a drag on the growth rate of net interest income, which is the common performance of 22Q4 under the influence of periodic interest reduction of inclusive small and micro loans, on the other hand, the pullback of 22Q4 bond market also makes the fair value of transactional financial assets significantly lower, resulting in the cumulative growth rate of other non-interest income at the end of 2022 compared with 22Q3. 19.0pct. Relatively speaking, the mid-income performance is relatively strong, the year-on-year growth rate is much higher than the 22Q3 9.5pct, some earnings in 2021 low base, while the decline in the size of the wealth management business revenue achieved 24% year-on-year growth. The year-on-year growth rate of homed net profit is nearly 6pct higher than that of 22Q3, mainly due to a significant decline in credit costs.
The growth rate of table expansion has been repaired, and the transformation of Pratt & Whitney has achieved remarkable results. 22Q1-Q3, the growth rate of total assets and loan balance continues to decline compared with the same period last year. Considering that the local financing demand in Wuxi remains strong (the local loan growth rate continues to be higher than the national average), we interpret it more as a phased result of Wuxi Bank's initiative to carry out inclusive transformation, in the process or moderately slow down the pace of large loans, and instead accelerate the introduction of small and micro loans. By the end of 2022, the balance of inclusive small and micro loans increased by more than 27% compared with the same period last year, accounting for a further increase in 2.1pct compared with 2021. At the same time, we are concerned that by the end of 2022, loan growth has stopped the downward trend and is on a par with 22Q3, which may indicate that the temporary "constraint" imposed by the inclusive transformation on statement expansion has begun to fade.
The net interest margin narrowed slightly, mainly from short-term corporate loans. The net interest margin in 2022 is lower than that in the first half of the year (4BP), showing good resilience as a whole. In terms of disassembly, the average deposit interest rate is lower than that of 22H1 (the same below) by 2BP. In terms of loans, the average corporate loan interest rate is down 6BP, but the retail loan rate is slightly up 1BP, while the short-term loan rate is down 13BP.
The defect rate has dropped sharply, and the provision coverage rate has continued to rise. By the end of 2022, the defect rate has decreased by 5BP compared with 22Q3 and 12BP compared with that at the beginning of the year, which is not only the performance of good risk control ability, but also the result of increasing bad write-off efforts. The attention rate is 0.31%, which is higher than 22Q3 by 5BP, and the overdue rate is lower than 22H1 by 13BP. These forward-looking indicators indicate that the asset quality of Wuxi Bank is still expected to continue to improve. The provision coverage rate is 553% higher than that of 22Q3 upstream 13.7pct. Such a high provision coverage rate is expected to play an important role in profit growth. Compared with 22Q3, the provision coverage rate has declined, and the subsequent credit cost is expected to remain low.
Investment advice: credit growth stabilizes and the non-performing rate continues to decline
The mid-income growth rate has achieved better growth in the market volatility, and the decline in credit costs has supported the profit growth rate from the previous month; the loan growth rate has stopped the downward trend, and the implicit constraints of inclusive transformation on table expansion may be fading; asset quality is expected to continue to improve, and the provision coverage rate remains high. It is estimated that the EPS for 23-25 is 1.15,1.37 and 1.62 yuan respectively, and the closing price on March 29, 2023 corresponds to 0.6 times the 23-year PB, maintaining the "recommended" rating.
Risk tips: downward macroeconomic growth; frequent epidemic risk; credit risk exposure.