Summary of the three quarterly reports:
The company's interest margin stabilized and rebounded in the third quarter, and the growth rate of net interest income changed from negative to positive compared with the same period last year, but the decline in middle income and other non-interest rates caused a certain drag on the company's revenue, which was-5.5% year-on-year and-7.7% year-on-year. The company stepped up its impairment provision, and the growth rate of net profit was somewhat lower than that in the second quarter, which was-9.5% compared with the same period last year. 1Q-3Q cumulative revenue, PPOP and homecoming net profit increased by-6.8%, 4.1%, 5.5%, 7.3%, 6.7%, 7.7% and-8.9%, respectively, compared with the same period last year.
The growth rate of Q3 net interest income in a single quarter changed from negative to positive year-on-year, with an increase of 2.0%. After stabilizing in the second quarter, the single-quarter annualized net interest margin rebounded, rising 2bp to 1.68% from the previous quarter, the rate of return at the asset end increased, and the liability side remained stable.
The asset-end yield continued to recover after stabilizing in the second quarter, rising 1bp to 4.0% in the third quarter from the previous quarter, while the structural increase in loan-to-interest-bearing assets also contributed to the spread. The interest rate on the debt side remains unchanged at 2.32%, effectively controlling costs while maintaining rapid growth in the scale of deposits.
Credit delivery performed well in the third quarter, with the year-on-year growth rate rising to 10% and the proportion of interest-bearing assets to 54.2%. Public loans are still the main investment. Q3 increased by 91.6 billion in a single quarter, an increase of 33.4 billion over the same period last year, and its share of interest-bearing assets increased by 0.8% from the previous month to 54.2%, and the structure was further improved. From the perspective of loan subdivision structure, the scale of public loans in the third quarter is still the main force, personal credit is weak. Public credit increased by 94.15 billion, an increase of 44.44 billion over the same period last year; personal loans decreased by 2.18 billion in a single quarter, an increase of 27.77 billion over the same period last year; and bills decreased by 380 million, down 17.49 billion from the same period last year. New loans totaled 331.05 billion in the first three quarters of this year, down from 405.75 billion in the first three quarters of last year. However, there was a large impulse of bills in last year's credit, while there has been a sharp decrease in bills in this year's credit. After excluding bills, the total amount of real credit issued in the first three quarters of this year was 433.84 billion, which greatly exceeded the 356.91 billion for the whole of last year, and the credit structure improved significantly compared with the same period last year. In the first three quarters of this year, the loan balance increased by 9.93% compared with the same period last year, further accelerating the growth rate compared with the second quarter.
The year-on-year growth rate of deposits further increased to 11.3%, and the debt structure further improved. It increased by 80.86 billion in a single quarter, an increase of 37.93 billion over the same period last year, and the proportion of deposits also increased by 0.6 percentage points to 58.9%. A total of 480.37 billion new deposits were added in the first three quarters, significantly exceeding the 378.83 billion increase for the whole of last year, and the deposit balance increased by 11.25% over the same period last year, which continued to accelerate compared with the second quarter.
On the whole, the asset quality of Societe Generale has improved. In the third quarter, the company's defect rate dropped to 1.07% from the previous quarter, and the momentum of improvement continued. The cumulative net bad production rate also decreased by 4bp to 1.22% from the previous month. 3Q23 provisions covered 237.78 per cent of undesirable loans, down 7.99 per cent from the previous month, although coverage was still higher than at the beginning of the year; loans were reduced by 10bp to 2.55 per cent from the previous month.
Investment suggestion: company 2023E, 2024E, 2025E PB 0.44X/0.41X/0.37X; PE3.73X/3.54X/3.33X, the fundamentals of the company are sound. Under the strategy of "business bank + investment bank" in the future, the on-balance sheet net interest income will maintain steady growth, and off-balance sheet mid-income growth is expected to open space under the background of direct financing development. The company's high ROE undervaluation does not include the option of corporate transformation and upgrading, and the safety margin of investment is very high. It is suggested that we should actively pay attention to the promotion of management transformation. We maintain the "overweight" rating and suggest positive attention.
Note: according to the three-quarter report of 2023, we have adjusted the assumptions of Societe Generale's credit growth, rate of return / interest payment, credit cost and so on. 2023E/2024E/2025E revenue is adjusted to 2129.47 billion yuan (original value is 2412.55 / 2675.40 / 292.504 billion yuan), and net profit is adjusted to 866.94 / 913.85 / 97.053 billion yuan (original value is 1099.10 trillion 119.417 billion yuan).
Risk hint: the economic downturn is higher than expected, and the company's operation is not as expected.