On the evening of September 27, 2023, Qilu Bank disclosed the performance of 3Q23. The operating income of 3Q23 was 9.1 billion yuan, the net profit of YoY+8.24%; was 2.94 billion yuan, and the annual weighted average ROE of YoY+16.22%; was 11.85%. By the end of September 2023, the asset size was 568.5 billion yuan, the non-performing loan ratio was 1.26%, and the provision coverage rate was 313.89%.
1. Profit growth has increased against the trend, and ROE has increased.
3Q23's revenue grew by 8.2%, down 2.6% from 1H23. The decline in revenue growth was mainly affected by falling interest spreads. Non-interest income increased by 8.2% over the same period last year, of which net income from fees and commissions fell by 21.9%, and the combined profit and loss of investment income and fair value changes increased by 38.2% compared with the same period last year. The growth rate of homed net profit is 16.2%, which is 0.7% higher than that of 1H23, and the profit growth rate goes against the trend. Thanks to the high profit growth, the annualized weighted average ROE of 3Q23 was 11.85%, up 0.9 percentage points from the same period last year.
2. The credit scale maintained a relatively rapid growth, and the interest rate spread decreased by 5BP compared with the previous month.
Credit has maintained double-digit growth. Q3 loans increased by 10.1 billion, mainly contributed by loans to the public. The size of Q3 deposits increased by 16.3 billion, contributing 109 and 5.4 billion to public and retail respectively.
Spreads fell 5BP from the previous month. The net interest margin of 3Q23 is 1.81%, which is slightly lower than 5BP and 15BP compared with 1H23 and 2022. The net interest margin of 3Q23 is 1.73%, which is 5BP lower than 1H23 and 14BP lower than 2022.
3. The quality of assets has improved, and the capital adequacy ratio has increased slightly.
As of the end of September 2023, the non-performing loan ratio was 1.26%, slightly lower than 23H1 by 1BP and 3BP compared with the end of 2022; the concerned loan ratio was 1.46%, down 15BP from 23H1. The provision coverage rate is 313.89%, which is 11.83% higher than that of 23H1, and the provision coverage rate is higher than that of 23H1. The loan ratio is 3.96%, which is higher than 23H1.
By the end of September 2023, the core tier one capital adequacy ratio / tier one capital adequacy ratio / capital adequacy ratio were 9.73%, 11.43% and 14.45%, respectively, which were higher than those of 23H1 and had strong capital endogenous capacity.
Investment advice: the profit growth rate is rising against the trend, and the asset quality is improving. The economy of Shandong area where Qilu Bank is located is more developed, and the effect of industrial transformation is remarkable. The scale of credit continued to grow rapidly, the growth rate of profits rose slightly against the trend, and the quality of assets continued to improve. 8 billion convertible debt to equity will support business development. We maintain a target valuation of 0. 7 times the 23-year PB and maintain an "overweight" rating corresponding to the share price of 4.92 yuan per share.
Risk hints: interest rate spreads have narrowed; the economic downturn has exceeded expectations and asset quality has deteriorated.