Core viewpoints
Ping an Bank 9M23 affected by interest spreads and other non-interest income, the decline in revenue expanded, profit growth declined. On the asset side, Ping an Bank took the initiative to adjust the retail loan structure, reducing the proportion of high-risk assets, tilting more resources to low-risk assets such as mortgages; on the liability side, the proportion of retail time deposits further increased, and deposit costs were rigid. The structural factors at both ends of the negative capital lead to the pressure on the interest rate difference, but the initiative is expected to improve the future credit cost. Wealth management, continue to consolidate the customer base, bancassurance team to further expand.
Event
On October 24, Ping an Bank released its 9M23 performance report, which showed that its operating income was 127.634 billion yuan, down 7.7% from the same period last year (1H23VRV 3.7%), and its net profit was 39.635 billion yuan, an increase of 8.1% over the same period last year. 3Q23 defective rate is 1.04%, quarter-on-quarter increase of 1b p-on-quarter, 3Q23 provision coverage decreased 8.9pct to 282.6% on-quarter.
Brief comment
1. The growth rate of revenue and performance is lower than that of the medium-sized report, the interest spread of the active adjustment of the credit structure narrowed, and other non-interest rates are the main drag. 9M23 Ping an Bank achieved operating income of 127.634 billion yuan, down 7.7% from the same period last year, and net interest income decreased by 6.2% compared with the same period last year. As Ping an Bank is taking the initiative to optimize its credit structure and reduce high-priced retail loans, the interest margin has narrowed further. In terms of non-interest income, net fee income increased by 2.5 per cent year-on-year, up 0.6 pct from the first half of the year; other non-interest income of 3Q23 Ping an Bank fell sharply by 43.7 per cent in the third quarter due to market fluctuations. Due to the expansion of revenue decline, 9M23 achieved a net profit of 39.635 billion yuan, an increase of 8.1% over the same period last year. In terms of performance attribution, low provision and scale growth are the main positive factors, contributing 14.1% and 5.4% positively, while narrowing interest spreads and other changes in net income have a negative impact on profits of 14.2% and 6.3%.
We believe that although Ping an Bank takes the initiative to reduce high-priced retail loans at the expense of current interest spreads, building a solid risk bottom line will lay an important foundation for steady development under low credit costs in the future. it is a very necessary business strategy in the context of the current macroeconomic pressure.
two。 On the asset side, the active pressure on high-priced loans, the debt side, the retail fixed-term trend continued, and the net interest margin narrowed further. 3Q23 Ping an Bank net interest margin of 2.30%, quarter-on-quarter decline of 17bps9M23 net interest margin of 2.47%, lower than 1H23 8bps. According to the quarter-on-quarter change analysis of interest spreads, 3Q23 loan-side interest rate factors drag 13bps is the main reason for the decline of interest spreads, and deposit costs continue to be rigid due to the retail fixed-term trend.
On the asset side, 3Q23's return on interest-bearing assets fell 14bps to 4.53% quarter-on-quarter, while loan yield fell 19bps to 5.33% month-on-quarter.
In the third quarter, Ping an Bank continued to take the initiative to adjust the retail loan structure, reducing high-priced loans. 3Q23 retail loan yields fell sharply 37bps to 6.39% from the previous quarter, further expanding the decline. In terms of loan structure, the loan size of 3Q23 Ping an Bank decreased by 0.4% quarter-on-quarter, and its proportion of assets decreased by 0.4bpct to 62.1% quarter-on-quarter, of which retail loan size decreased by 0.9% quarter-on-quarter, credit card and auto finance loans decreased by 2.2% and 2.8% respectively, and new loans decreased by 24.7% compared with the beginning of the year. Lower-risk home mortgages and licensed mortgages grew 2.1 per cent quarter-on-quarter, accounting for 42 per cent of retail loans, up 4pct from the start of the year.
On the debt side, the cost of 3Q23 interest-bearing debt rose 2bps to 2.28% quarter-on-quarter, while the cost of deposits rose 1bp to 2.20% quarter-on-quarter. Among them, the cost of deposits for enterprises and residents further rose to 2.13% and 2.36% in 1bp and 3bps respectively. In terms of the average daily deposit structure, the average daily retail time deposit increment of 3Q23 reached 78%, accounting for a quarter-on-quarter increase of 0.9pct to 26.7%.
3. With the exposure of the risks related to the pressure drop of high-priced retail loans, the provision coverage decreased slightly. The defect rate of 3Q23 Ping an Bank increased by 1bp to 1.04% month-on-quarter. 3Q23 plus write-off defect rate (measured) increased from 17bps to 198bps quarter-on-quarter. In terms of forward-looking indicators, the interest rate of Ping an Bank of 3Q23 rose to 1.77 per cent quarter-on-quarter, which is expected to be related to the further tightening of identification standards after the implementation of the new rules on financial asset classification; the overdue rate rose 3bps to 1.43 per cent quarter-on-quarter. The standard for determining non-performing loans was further tightened, and the proportion of non-performing loans overdue for 60 days and more than 90 days fell by 3bps to 66% and 80% compared with the beginning of the year. The provision coverage rate decreased by 8pct to 282.62% on a quarter-on-quarter basis, still at a relatively high level compared with the same industry.
From a product point of view, the retail side, the new loan non-performing active exposure, 3Q23 Ping an Bank car loans, credit card bad rate fell 10%, 24bps to 1.28%, 2.64%, respectively, the new loan caliber adjusted default rate increased to 1.81% from the beginning of the year. For the public side, the recognition of non-performing real estate loans was intensified. The non-performing rate of 3Q23 to public loans increased by 7bps to 0.61% quarter-on-quarter, among which the bad rate of public real estate loans increased by 46bps to 1.47%. Take the initiative to recognize some non-overdue loans and increase provisions.
4. The customer base of wealth management has been further consolidated, and the new wealth team that understands insurance continues to expand. By the end of September 2023, Ping an Bank's retail customers AUM and private bank standard customers AUM increased by 11.5% and 17.2% to 4 trillion and 1.9 trillion respectively over the beginning of the year, while Fortune customers had 1.3693 million and 89300 private customers, an increase of 8.2% and 10.9% respectively over the beginning of the year.
Wealth management income maintained double-digit growth, with agency insurance making a major contribution. 9M23 Ping an Bank achieved a wealth management fee income of 5.636 billion yuan, an increase of 10.4% over the same period last year, of which agent wealth management income increased by 5.3% to 699 million yuan, and agent insurance income increased by 98%. By the end of September 2023, Ping an Bank's new insurance-aware wealth team had more than 2500 employees, and its manpower continued to improve.
5. Investment advice and profit forecast: ping an Bank 9M23 is affected by interest spreads and other non-interest income, the decline in revenue expanded, profit growth declined. On the asset side, Ping an Bank took the initiative to adjust the retail loan structure, reducing the proportion of high-risk assets, tilting more resources to low-risk assets such as mortgages; on the liability side, the proportion of retail time deposits further increased, and deposit costs were rigid. The structural factors at both ends of the negative capital lead to the pressure on the interest rate difference, but the initiative is expected to improve the future credit cost. Wealth management, continue to consolidate the customer base, bancassurance team to further expand. It is estimated that the growth rate of homed net profit from 2023 to 2025 is 7.4%, 6.6% and 6.7%, respectively. The current share price corresponds to .51 times 23-year PB, maintaining the buy rating.
6. Risk hints: (1) the progress of economic recovery is not as expected, the solvency of enterprises is weakened, and some enterprises with poor credit level may have the risk of default, which leads to the risk of bad exposure of banks and a sharp decline in asset quality. (2) the concentrated risk exposure in key areas such as real estate and local financing platform debt has a great impact on the asset quality of banks and greatly weakens the profitability of banks. (3) the wide credit policy is not as strong as expected, and the rapid economic development of the company's operating area is not sustainable, which has a great adverse impact on the company's credit. (4) the effect of retail transformation is not as good as expected, and large-scale fluctuations in the equity market affect the company's wealth management business.