Bank of Beijing's net profit rose 4.5% in the first three quarters compared with the same period last year, while revenue fell 3.2% from the same period last year. In the third quarter, interest rate spreads rose month-on-month, scale growth accelerated, and stock risk continued to clear. With the relief of the company's historical burden, the performance pressure will be greatly alleviated, the results of retail and digital transformation may also be gradually revealed, and the financial performance may be further improved. At present, the company has PB0.39X in 2023, with a dividend yield of 7.1%. It is actively optimistic about the follow-up performance of the company and maintains the overweight rating of the company.

Support the main points of rating

The growth rate of profit and revenue has slowed down slightly.

The net profit of Bank of Beijing in the first three quarters increased 4.5% compared with the same period last year, which was 0.4% slower than that in the first half of the year. Operating income fell 3.2% from the same period last year, an increase of 1.6% over the first half of the year. The year-on-year contribution to performance mainly comes from scale and provision, and the pressure comes from interest rate spreads and costs.

ROAE11.05%, fell 0.20 percent year-on-year. At the end of the third quarter, the core tier one capital adequacy ratio was 9.25%, down 71bp from the same period last year.

It is estimated that the interest rate spread in the third quarter rebounded from the previous quarter, and the cost advantage continued to consolidate. In the first three quarters, net interest income fell 3.8% from the same period last year, slightly slower than in the first half of the year.

The margin of interest income improved in the third quarter, with a decline of 3.7% in the third quarter, 0.7 percentage points lower than in the previous quarter. The spread rose from the previous quarter, with the estimated quarterly net interest margin of 1.58% in the third quarter, an increase of 7bp over the previous quarter. It is estimated that the rate of return on interest-bearing assets in the third quarter is 3.74%, a month-on-month increase of 5bp, a debt cost ratio of 2.19%, a month-on-month decline of 2bp, and both ends of assets and liabilities contribute to the rebound of interest spreads. Among them, the improvement in the debt side is due to the increase in the proportion of core deposits in the company's business. The company disclosed that at the end of the third quarter, the proportion of core deposits to the public increased by 7 percentage points compared with the beginning of the year, driving the interest rate on public deposits to fall by 11bp compared with the beginning of the year, and continued to consolidate the cost advantage.

Credit growth accelerates, business transformation drives structural change

At the end of the third quarter, the company's total assets increased by 15.3% year-on-year, 1.8 percentage points higher than the growth rate at the end of half a year, including 13.5% year-on-year loans, 2.2% growth rate, 18.1% year-on-year increase in bond investment, and 22.7% year-on-year growth in trading. The company disclosed that at the end of the third quarter, public loans (excluding discounts) increased by 16.1% compared with the beginning of the year, individual loans increased by 12.1% compared with the same period last year, and retail growth accelerated better than the industry. Retail consumer loans are growing rapidly, with consumer loans accounting for 26.7%, up 8.3 percentage points from a year earlier. At the end of the third quarter, inclusive financial loans increased by 30.5% over the beginning of the year, accounting for 26.8% of the increase in loans. Deposits increased by 10.6% in the third quarter compared with the same period last year, which was 0.8 percentage points slower than that of half a year.

Other non-interest contribution profits

In the first three quarters, non-interest income fell 1.3% compared with the same period last year, of which fee income fell 41.6% year-on-year, while other non-interest income increased by 33.7%.

The quality of assets continues to improve and the provision remains stable

At the end of the third quarter, the defect rate was 1.33%, with a steady decline in 1bp from the previous quarter, and a slight increase of 0.4% from the previous quarter. The impairment loss in the first three quarters decreased by 26.4% compared with the same period last year, and the improvement in asset quality led to a decline in the pressure on provisions. At the end of the third quarter, the provision coverage rate was 215.23%, down 2.42% from the previous quarter; the loan ratio was 2.86%, a month-on-month decrease of 4bp, and the margin of loan stock provision was slightly lower. China News estimates that the company's non-loan stock provision of 41 billion yuan, the overall stock is relatively high.

Valuation

According to the company's 3 quarterly results, we maintain the profit forecast that the EPS of 2023 PB in 2024 will be 1.08 USD 1.21 yuan, and the current stock price will be 0.39x/0.35x corresponding to 2023 Universe in 2024.

Main risks faced by rating

The economic downturn and overseas fluctuations led to the deterioration of asset quality more than expected.