On the evening of October 30, 2023, the Bank of Beijing disclosed its 3Q23 results. 3Q23 achieved operating income of 49.7 billion yuan, YoY -3.2%; net profit of 20.2 billion yuan, YoY +4.5%; and an annualized weighted average ROE of 11.05%. As of the end of September 2023, the asset size was 3.67 trillion yuan, the non-performing loan ratio was 1.33%, and the provision coverage rate was 215.23%.
1. Profit growth has declined steadily and slightly, while ROE has declined slightly.
The 3Q23 revenue growth rate was -3.2%, down 1.7 percentage points from 1H23. The revenue growth rate declined, mainly due to the decline in non-interest income. In 3Q23, net interest income and net income from fees and commissions decreased by 3.8% and 41.6% year on year, respectively. Net profit grew by 4.5% in 3Q23, slightly down 0.4 percentage points from 1H23. The weighted average ROE for 3Q23 was 11.05%, a slight decrease of 0.2 percentage points from the same period last year.
2. The scale of credit has maintained a relatively rapid growth, and interest spreads are basically stable.
The scale of credit has maintained a relatively rapid growth. As of the end of September 2023, total assets, loans, and deposit sizes increased 15.3%, 13.5%, and 10.7% year-on-year respectively. Q3 loans increased by 15.6 billion dollars in a single quarter, mainly due to contributions to public loans; in Q3, the deposit size fell slightly by 2.4 billion dollars in a single quarter.
Interest spreads are generally stable. We estimate that the net interest spread for 3Q23 is 1.53%, slightly down 1BP from 1H23 and 23BP from 2022. On the asset side, the return on interest-bearing assets decreased by 2BP to 3.65% from 1H23; on the debt side, the cost ratio of interest-bearing debt was 2.14%, slightly up 1BP from 1H23. Looking ahead to the whole year, interest spreads remain under pressure.
3. Asset quality is improving, and the core Tier 1 capital adequacy ratio has increased.
Asset quality is improving. As of the end of September 2023, the non-performing loan ratio was 1.33%, down 1BP from 23H1, down 10BP from the beginning of the year; 23H1 focused on the loan ratio of 1.5%, down 11BP from the end of 2022; 23H1 overdue loan ratio was 1.67%, down 59BP from the end of 2022. The provision coverage rate was 215.23%, down 2.42 percentage points from 23H1; the loan ratio was 2.86%, down 5 BP from 23H1.
The core tier 1 capital adequacy ratio has increased. As of the end of September 2023, the core Tier 1 capital adequacy ratio and Tier 1 capital adequacy ratio were 9.25% and 12.28% respectively, up 0.06 and 0.01 percentage points from 23H1; the capital adequacy ratio was 13.46%, the same as 23H1.
Investment advice: Profit growth has declined steadily and slightly, and asset quality has improved. As a leading urban commercial bank, the Bank of Beijing has obvious regional advantages. Interest spreads have basically stabilized, and asset quality is improving. We maintain 0.5 times its 23-year P/B target valuation, corresponding to 5.9 yuan/share, and maintain a “highly recommended” rating.
Risk warning: Financial concessions, narrowing interest spreads; asset quality deteriorates.