Event: on August 9, Pudong Development Bank announced its half-year results of 2023, KuaiBao. The company's revenue in the first half of the year was 91.2 billion yuan,-7.5% compared with the same period last year. The net profit belonging to shareholders of listed companies was 23.1 billion yuan,-23.3% compared with the same period last year. The non-performing loan ratio was 1.49%, compared with the beginning of the year-3bp, and the overall performance was in line with expectations.
The business is still bottoming out. In the first half of the year, Pudong Development Bank achieved revenue of 91.23 billion yuan,-7.5% year-on-year; net profit of shareholders belonging to listed companies was 23.14 billion yuan,-23.3% year-on-year, of which 2Q23 operating income was 43.15 billion yuan, year-on-year-11.3% (1Q23 yoy-3.9%), net profit attributable to listed shareholders was 7.307 billion yuan, year-on-year-32.3% (1Q23 yoy-18.4%), 1H23 weighted average ROE3.73%, year-on-year-1.40pct Basic earnings per share is 0.76 yuan,-24% compared with the same period last year. The company's business is still in the bottoming stage, and the company's new business direction and strategy are still in practice, but the Yangtze River Delta region, which the company focuses on, has recovered rapidly since this year, which is expected to contribute to the recovery of the company's business.
The asset structure has improved, and total assets have maintained growth. By the end of the first half of the year, the total assets of Pudong Development Bank had reached 8.9325 trillion yuan, + 2.62% compared with the end of last year, of which the total loan amount was 4.9775 trillion yuan, which was 1.57% higher than that at the end of last year, and the marginal growth rate of total loans at the end of 1Q23 + 0.02% and 2Q was-1.52% month-on-month. The growth rate of credit has not yet recovered. The total debt is 8.2114 trillion yuan, 2.67% from the end of last year, 0.87% from the end of 1Q23, of which, the total deposit is 5.0018 trillion yuan, 3.63% from the end of last year, and + 0.72% from the month-on-month marginal growth rate of total deposit at the end of 1Q23 + 2.16%, and the marginal growth rate has recovered. Loans are expected to be affected by the expected mood of the economy in the second quarter, and credit growth slowed as a whole. The loan growth rate of Pudong Development Bank is also affected by the adjustment of the direction of Xiaobai Maimai Inc in the disposal of non-performing assets, the overall growth rate is lower than that of the industry, and the overall asset structure of the company is still improving.
The risk of "controlling the new and reducing the old" has achieved initial results. The company continues to increase the stock of non-performing assets disposal efforts, risk pressure reduction has achieved remarkable results. By the end of the first half of the year, the balance of three types of non-performing loans of Pudong Development Bank was 74.3 billion yuan, 317 million yuan lower than at the end of last year; the non-performing loan ratio was 1.49%, which was higher than that at the end of the first quarter-3bp; and the provision coverage ratio increased for three consecutive quarters to 170.45% at the end of the first half of the year, an increase of 11.41 percentage points over the end of last year. Risk "control the new and reduce the old", continue to increase the stock of non-performing assets disposal efforts, has achieved initial results, the provision of safe space has been improved, and the ability to resist risks has continued to be strengthened.
Investment advice: due to the interest rate cut, it will still take time to improve asset quality. It is expected that the annual results of 23E/24E/25E Bank will still be under pressure. We forecast that the operating income of Pudong Development Bank will be 184 billion / 188.4 billion / 195.2 billion yuan, respectively, which is-2% and 4% respectively compared with the same period last year. The net profit of returning to the parent will be 42.3 billion / 42.4 billion / 45.1 billion yuan, which is-17% / 0% and 6% respectively compared with the same period last year. On August 10, 2023, the closing price was 7.42 yuan per share, and the corresponding PB of 23E/24E/25E was 0.35, 0.32 and 0.30 times, with a "recommended" rating.
Risk hint: there has been a major shift in macroeconomic policy; the downward net interest margin of interest rates has narrowed sharply; and the company's strategy has not advanced as expected.