The Bank of Beijing released its 2023 semi-annual report. Our comments are as follows: 23H1's revenue, PPOP, and return net profit increased by -1.6%, -6.2%, and 4.9% year-on-year, respectively, and the growth rates increased by 5.36 pct, 7.15 pct, and 2.99 pct, respectively, compared to 23Q1. Judging from the driving force of cumulative performance, growth in scale, calculation of provisions, and other income and expenditure are the main positive contributions. Factors such as net interest spreads, net handling fee revenue, and rising cost to revenue ratios are a certain drag.
Highlights: (1) Scale growth remains high. On the asset side, the company's total assets at the end of 23H1 were 3.63 trillion yuan, ranking first among commercial banks in the city, up 13% year on year and 1.6 pct over 23Q1, the highest since 2018. 23H1 loans grew 11.3% year on year, up 2.7 pct from 23Q1. Structurally, they were mainly for the public sector. The scale of financial investment increased by 19.6% year on year, maintaining a high level. On the debt side, 23H1 deposits increased 11.3% year on year, up 3.0% from 23H1, and contributed nearly 50% to the official term stock increase. (2) Deposit costs declined, and the company actively optimized the deposit structure. By providing customers with comprehensive marketing services such as payment, settlement, and cash management, etc., it led to core deposit growth. In the first half of the year, the average interest rate on RMB corporate deposits fell by 10 bps, the overall deposit cost ratio fell by 6 bps, and the debt cost ratio fell by 1 bps. (3) Asset quality is stable, moderate and improving. The 23H1 non-performing loan ratio was 1.34%, down 2 bps from 23Q1. Among them, the estimated value of the non-performing loan ratio for public loans at the end of 22 was 1.73%, down 31 bps from 22A; 23H1 personal loan non-performing loan ratio was 0.97%, up 15 bps from 22A. The 23H1 attention rate was 1.50%, down 11 bps from 22A; the overdue rate was 1.67%, down 59 bps from 22A; and the provision coverage rate was 217.65%, up 0.64 pct from 23Q1. According to estimates, the company's 23H1 bad generation rate was 0.68%, down 15 bps from the previous year, and the new bad control was effective.
Attention: (1) Return on assets is declining, hampered by loans and financial investment. The company's 23H1 net interest spread is 1.54%, down 22 bps from 22A. Mainly affected by the repricing of stock loans and the decline in financial investment yields at the beginning of the year, the yield on interest-bearing assets declined by 15 bps in the first half of the year. Among them, the yield on 23H1 loans fell 15 bps from 22A, and the return on investment assets declined by 40 bps, mainly due to the company's allocation of large-scale government bonds. Looking ahead to the second half of the year, considering that physical demand is still in the recovery channel, compounded by two recent interest rate cuts, it is expected that the downward pressure on return on assets will remain. (2) Medium revenue growth. 23H1 Fee and commission revenue was $2,588 million, a year-on-year decrease of 41.42%, mainly due to a year-on-year decrease of 55.34% in handling fee revenue for agency and entrustment services.
Profit forecast and investment suggestions: The net profit growth rate for 23/24 is expected to be 5.3%/7.5%, respectively, EPS is 1.20/1.29 yuan/share, the current stock price corresponds to 23/24 PE 3.78X/3.51X, respectively, and the corresponding PB for 23/24 is 0.38X/0.36X, respectively. Taking into account the company's historical PB (LF) valuation center and fundamental improvements, the 23-year PB valuation was given 0.5X, a reasonable value of 5.90 yuan/share, and the “buy” rating was maintained.
Risk warning: (1) economic growth has declined beyond expectations; (2) rising deposit costs have exceeded expectations; (3) international economic and financial risks have exceeded expectations; (4) policy regulation has exceeded expectations.