Bank of Beijing released the report for the third quarter of 2023. Our comments are as follows: revenue, PPOP and net profit of parent company increased by-3.2%, -9.2% and 4.5% respectively on a year-on-year basis in Q1~3, and the growth rate changed by-1.65pct, -3.03pct and-0.39pct respectively compared with 23H1. From the perspective of accumulated performance drive, scale growth, provision provision and other income and expenditure are the main positive contributions, while net interest margin, net fee income and cost-income ratio rise form certain drag.

Highlights: (1) Credit expansion remains high. At the asset end, the total asset scale of the company at the end of 23Q3 was 3.67 trillion yuan, ranking first among urban commercial banks, among which, the year-on-year growth rate of interest-bearing assets reached 15.2%, the highest in recent five years. The loan growth rate of 23Q1 ~3 was 13.5% year-on-year, 2.2pct higher than that of 23H1, and it was invested in key fields such as focusing on scientific innovation, green, inclusive,"specialty and innovation". At the same time, the financial investment scale of the company at the end of 23Q3 increased by 19.4% year-on-year, still maintaining a high level. At the debt end, 23Q3 deposits contracted in a single quarter, but the growth of inter-bank liabilities, central bank loans and bonds issued remained high, driving interest payment liabilities to grow by 16.3% year-on-year. (2) Other non-interest income grew strongly. In Q1~ Q3, the company realized other non-interest income of RMB 8.8 billion yuan, with a year-on-year growth of 33.7%, mainly due to the high investment income. The quarterly income in Q3 was basically the same as that in Q2. (3) Calculate the net interest margin month-on-month upward. According to our calculation, the net interest margin of the Company in 23Q1 ~3 is 1.57%, which is 2bp higher than that of 23H1, mainly due to the upward 4bp of interest-bearing asset yield. It is estimated that on the one hand, due to the development of retail business, the proportion of consumer loan balance in retail loans at the end of 23Q3 has reached 26.7%, increasing by 8.3pct year-on-year, which may relieve the downward pressure of loan yield to some extent; On the other hand, in the first half of the year, due to the allocation of large-scale government bonds for investment assets, the rate of return declined significantly. Considering that the Company continued to increase the allocation of investment assets in the third quarter, it is expected that the structure will also be adjusted to stabilize the rate of return on assets. (4) Asset quality is stable. The non-performing loan ratio of 23Q1 ~3 was 1.33%, 1 bp lower than that of 23H1; the provision coverage ratio was 215.23%, 2.42pct lower than that of 23H1. It is estimated that the new generation rate of 23Q1 ~2 defects of the company is 0.77%, down 48bp year-on-year.

Attention: (1) Calculate the upward trend of interest-bearing liability cost ratio. According to our calculation, the liability cost ratio of the Company in 23Q1 ~3 is 2.20%, which is 3bp higher than the calculated value of 23H1, but the deposit cost ratio of RMB company decreases by 11bp compared with 22A, and the decrease is 1bp wider than 23H1. Therefore, it is estimated that the upward liability cost may be mainly caused by the increase of non-deposit liabilities proportion. (2) Increase in cost-income ratio.

23Q1~3 The cost-income ratio of the company increased by 4.29pct year-on-year, paying attention to the subsequent fluctuation.

Profit forecast and investment suggestion: It is estimated that the net profit growth rate of parent company in 23/24 years will be 5.0%/7.3% respectively, EPS will be 1.19/1.28 yuan/share respectively, PE corresponding to 23/24 years will be 3.79X/3.52X respectively, PB corresponding to 23/24 years will be 0.38X/0.35X respectively. Comprehensive consideration of the company's historical PB (LF) valuation center and fundamental improvement, maintain the reasonable value of 5.90 yuan/share unchanged, corresponding to 23 years PB valuation of about 0.5X, maintain the "buy" rating.

Risk hints: (1) economic growth is falling faster than expected; (2) deposit costs are rising higher than expected; (3) international economic and financial risks are higher than expected; (4) policy regulation is stronger than expected.