Events:
On October 30, the Bank of Beijing released its quarterly report for 2023, with operating income of 49.74 billion, down 3.2% from the same period last year, and net profit of 20.23 billion, up 4.5% from the same period last year. The annualized weighted average return on equity was 11.05%, down 0.2pct from the same period last year.
Comments:
Revenue growth is solid and profits remain high. The cumulative year-on-year growth rates of 1-3Q23 revenue, PPOP and home net profit were-3.2%,-9.2% and 4.5% respectively, which decreased by 1.7%, 3% and 0.4% respectively compared with 1H23. The annual growth rates of revenue and scale net profit were-6.4% and 3.6% respectively. Among them, the cumulative growth rate of net interest income and non-interest income was-3.8% and-1.3% respectively, which was 0.1% and-6.8pct higher than that of 1H23. Split the profit growth structure over the same period last year, with scale expansion and provision as the main contribution, respectively, driving the performance growth rate of 20.9 and 23.2 pct, respectively; from the perspective of marginal changes, the boosting factors mainly include: the increase in scale and provision contribution; the drag factors mainly include: net interest margin, business expenses with negative drag, non-interest contribution from positive to negative.
Under the low base, the credit growth rate increases against the trend, and the advantage of project reserve is highlighted. The company's 3Q increased its interest-bearing assets by 43.4 billion in a single quarter, an increase of 66.6 billion over the same period last year, and the balance of interest-bearing assets grew by 15.2% year-on-year, an increase of 2.2pct compared with the end of 2Q.
From the perspective of the structure of interest-bearing assets, the scale of new loans, financial investment and interbank assets in 3Q in a single quarter was 15.6 billion, 14.7 billion and 13.2 billion respectively, of which loans and interbank assets increased by 36.2 billion and 30.3 billion respectively compared with the same period last year. The new scale of financial investment is roughly the same as the same period last year. The growth rates of loans, financial investment and interbank asset balances were 13.5%, 19.4% and 11.5% respectively over the same period last year, which were 2.2%,-0.3 and 9.1pct respectively higher than those at the end of 2Q. Affected by the lack of effective demand, the issuance of 3Q credit in the banking system has obviously weakened, but the Bank of Beijing has still achieved a significant increase compared with the same period last year, which has the impact of a low base in the same period last year; on the other hand, it also highlights the advantage of the company's project reserves. loans in key areas such as scientific innovation, green, culture and inclusive finance of the Bank of Beijing maintained good growth during the reporting period.
Retail credit expansion is dominant, and loans in key areas show a high degree of prosperity. Judging from the 3Q single-quarter credit delivery structure, the parent bank caliber corporate loans (excluding discounts) and retail loans increased by 1.9 billion and 16 billion respectively, of which retail loans increased by 4.8 billion compared with the same period last year. From the perspective of public relations, financial loans for scientific and technological innovation, green and culture increased by 30.3%, 33% and 22.8% respectively over the beginning of the year, which were higher than those of general loans by 19.4,22.1 and 11.9 pct, respectively, and increased by 54,52 and 3.6 billion in a single quarter, accounting for 34.8%, 33.6% and 23.1% of new loans, respectively. The total new scale of the three is 14.3 billion, which is much higher than 1.9 billion of corporate loans (excluding discounts) of the parent bank. From a retail point of view, consumer loans account for 26.7% of retail loans at the end of 3Q, which is about 2pct higher than that at the end of 2Q. It is expected that consumer loans and operating loans are still the leading forces in retail credit expansion.
The absorption of inter-industry debt has been increased, and retail deposits have increased better. The company's 3Q increased its interest-paying liabilities by 31.9 billion in the single quarter, an increase of 49.3 billion over the same period last year, and the balance grew by 16.4% year-on-year, an increase of 1.9 pct over the end of 2Q. In terms of debt structure, 3Q added deposits, bonds payable and interbank liabilities of-2.4 billion, 1.7 billion and 32.6 billion, respectively. Among them, deposits increased by 13.2 billion over the same period last year, bonds payable and interbank liabilities increased by 35.5 billion and 27 billion respectively over the same period last year; deposits, bonds payable and interbank liabilities increased by 10.7%, 26.2% and 29.7% respectively over the same period last year, which were-0.8,11.3 and 4.7pct respectively compared with the end of 2Q. From the perspective of deposit structure, the average daily deposit of the Bank of Beijing increased by 17.9% over the beginning of the year, of which core deposits increased by 23.3%, much higher than the 8.2% increase in general deposits.
It is estimated that the NIM increases the 2bp to 1.58% and the 3Q spread is generally stable. It is estimated that the company's 1-3Q23 spread is 1.58%, which is 2bp higher than that of 1H23. Among them, the rate of return on interest-bearing assets and the cost ratio of interest-paying liabilities are 3.75% and 2.22% respectively, which are higher than 1H23 by 4bp and 2bp respectively. The company's asset-side pricing is expected to remain generally stable, but debt costs are still under upward pressure, specifically: ① asset side: since the beginning of this year, the Bank of Beijing has continued to increase the allocation of high-priced retail loans, which helps to stabilize asset-side pricing. 1-3Q23 individual loan interest income increased by 15% year-on-year, 1pct higher than 1H23; ② debt side: the estimated value shows that the company's debt cost is still under upward pressure, and it is expected that long-term and fixed deposits are still the main pressure points.
Net other non-interest income maintained a high growth, while fee income continued to be under pressure. 1-3Q23 non-interest income fell 1.3 per cent year-on-year to 12.19 billion, a slower 6.8pct growth rate than 1H23. From the perspective of non-interest income structure, net fee and commission income decreased by 41.6% to 3.36 billion compared with the same period last year, which is roughly the same as that of 1H23. It is expected that agency, financial management and entrustment business are still the main drag. Net other non-interest income increased by 33.7% to 8.84 billion compared with the same period last year, which was lower than that of 1H23 by 21.1pct. Due to the upward interest rate of 3Q bond market, bond valuation income decreased, while the forecast company confirmed some bond investment income, so that other non-interest rates as a whole maintained good growth. Among them, investment income grew by 28.6% year-on-year, 4.5 pct higher than 1H23; fair value change profit and loss increased by 496.4% year-on-year, but lost 350 million per quarter. Non-interest income accounted for 24.5% in the first three quarters, an increase in 0.5pct compared with the same period last year.
The quality of assets remains sound and the ability to offset risks remains high. At the end of 23Q3, the balance of non-performing loans of the Bank of Beijing was 26.5 billion, an increase of 100 million compared with the end of 2Q, and the non-performing loan ratio was 1.33%, down 1bp from the end of 2Q. In terms of provision, the 3Q credit impairment loss / average total assets (annualized) is 0.45%, which is lower than that of 2Q (18bp), and the provision balance is 57.1 billion, which is 420 million lower than that of 2Q. It is expected that the company will still maintain a large degree of bad disposal; the provision coverage rate is 215.2%, which is lower than that at the end of 2Q by 2.4pct, and the loan ratio is 2.86%, which is lower than that at the end of 2Q by 5bp, and the risk offset ability remains high.
The core level 1 adequacy ratio will be increased to 9.25% for 5bp. At the end of 23Q3, the core tier 1 / tier 1 / total capital adequacy ratio of the company was 9.25%, 12.28%, 13.46% respectively, in which the core tier 1 capital adequacy ratio increased by 5bp compared with the end of 2Q, and the level 1 / total capital adequacy ratio was the same as that at the end of 2Q; the year-on-year growth rate of RWA was 14.7%, which was higher than that at the end of 2Q by 1.9pct.
Affected by the dividend factor, 3Q's undistributed profit achieved better growth under the effect of 2Q's low base, and the core tier one capital net growth rate reached 2.1% month-on-month, which was higher than the 1.5% month-on-month growth rate of RWA, promoting the core tier one capital adequacy ratio to increase.
Earnings forecasts, valuations and ratings. The Bank of Beijing ploughs the capital, and loans from economically developed areas such as Beijing, the Yangtze River Delta and the Pearl River Delta account for more than 70%. Retail transformation has been continuously promoted in recent years, and the "five major transformations" have been accelerated since 2022, the contribution of retail revenue has been enhanced, and the efficiency of subsequent retail transformation is expected to continue to be released. The company's current A-share PB (LF) is 0.4 times, and the dividend yield is as high as 6.86% (ranking third among A-share listed banks). As a typical "low valuation, high dividend" variety, it is attractive to investors who pursue long-term absolute returns. Considering that the NIM of the 4Q banking system will be affected by the reduction of the stock mortgage and the interest rate reduction and extension of urban investment bonds, the downgrade company's EPS in 2023-2025 is estimated to be 1.22 (- 5.4%) / 1.30 (- 7.1%) / 1.37 (- 8.1%) yuan. The current stock price corresponds to the PB valuation of 0.38, 0.35, 0.33 times, and the PE valuation of 3.71, 3.49, 3.30, respectively, maintaining the "overweight" rating.
Risk hint: if the macroeconomic decline exceeds expectations, it may increase the potential risk of large risk exposure.