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The Bank of Beijing released its three-quarter report of 2023, with operating income of 49.7 billion yuan in the first three quarters of 2023, a negative increase of 3.21 percent over the same period last year, and a net profit of 20.2 billion yuan in the first three quarters, an increase of 4.5 percent over the same period last year. The weighted average rate of return on net assets was 11.05 percent, down 0.2 percentage points from the same period last year. At the end of the third quarter, total assets were 3.67 trillion yuan, an increase of 8.40 percent over the beginning of the year, of which loans and deposits increased by 14.4 percent and 8.20 percent respectively.
Peace viewpoint:
The performance is in line with expectations and pay attention to the promotion of retail transformation. The Bank of Beijing achieved a 4.5% growth in net profit in the first three quarters of 2023, which was 0.4 percentage points lower than in the first half of the year, in line with expectations.
The decline in revenue growth is still a major drag on profitability. in the first three quarters of 2023, revenue fell 3.2% from the same period last year, which was larger than that in the first half of the year. Affected by the continued decline in LPR interest rates and sluggish middle income growth, it was consistent with the overall trend of the industry, of which net interest income and middle income decreased by 3.8% and 41.6% respectively. As the industry is still facing the impact of downward asset-end pricing and insufficient effective demand, the revenue side of the company will still face some pressure, but we are also concerned about the accelerating pace of transformation of the Bank of Beijing in the retail sector in recent years. with the subsequent optimization of the organizational structure, the release of reform dividends is expected to bring new growth points to revenue.
Spreads continue to be under pressure and negative asset expansion is steady. According to our estimates of the balance at the beginning of the period, the net interest margin of the Bank of Beijing rose to 1.46% in the third quarter of 2023 compared with the second quarter, which has improved somewhat, but the absolute level is still low, which we believe is mainly affected by the downward asset-end pricing of the industry as a whole. In terms of scale, the company's total assets in the first three quarters increased by 15.3% over the same period last year, an increase of 1.8% over the first half of the year, of which deposits and loans increased by 10.7% and 13.5% respectively over the same period last year, and the overall growth remained robust. To a certain extent, volume premium is achieved through scale expansion, and the decline in net interest income is maintained in a reasonable range.
The bad quarter is slightly lower than the previous year, and the provision remains stable. The non-performing rate of Bank of Beijing in the third quarter of 2023 dropped to 1.33% compared with the second quarter of 2023, and improved quarter by quarter this year. With the strengthening of the company's bad disposal efforts and the improvement of the ability to prevent and control new risks, we expect the company's asset quality to continue a steady and positive trend in the future. In terms of provision, the company's provision coverage and loan ratio in the third quarter decreased by 2.4 percentage points / 5BP to 215% and 2.86% respectively from the previous quarter, and the risk resistance remained stable.
Investment advice: retail transformation continues to advance, the trend of asset quality is improving. Since its establishment, the company has ploughed the Beijing area and has the resource endowment of the capital economy and government customers, and the scale of deposits and loans ranks first among financial enterprises in Beijing. Since 2022, the Bank of Beijing has continuously deepened its retail transformation, and its income and asset structure have been significantly optimized. With the continuous clearing of the stock risk, the continuous shaking off of the historical burden and the recovery of market demand under the superimposed economic recovery, the company's future performance is expected to continue to improve. Taking into account the increasing negative impact of the downward asset-end pricing level on revenue in the industry as a whole, we slightly downgrade the company's profit forecast for 23-25, and estimate that the company's EPS for 23-25 is 1.24 EPS 1.32 shock 1.43 yuan respectively (the original forecast for 23-25 is 1.29 pound 1.44 shock 1.58 yuan). The corresponding profit growth rate is 5.5%, 6.6% and 8.9%, respectively (the original forecast for 23-25 years is 10.3%, 11.6%, 9.6%). At present, the company's share price corresponds to the 23-25 PB of 0.38x/0.36x/0.33x, the valuation safety margin is sufficient, and the "recommended" rating is maintained.
Risk tips: 1) the economic downturn has led to a higher-than-expected rise in asset quality pressure in the industry. 2) the decline in interest rates has led to a narrowing of industry spreads than expected. 3) the increase of cash flow pressure of real estate enterprises leads to the rise of credit risk.