Key points of investment
China CITIC Bank's net profit in 2023 was +8% year-on-year, revenue -3% year-on-year, and negative month-on-month improvement.
Overview of the data
China CITIC Bank's initial accounting net profit for 2023 increased 7.9% year on year, and the growth rate decreased 1.3 pc from 2023Q1-3; revenue fell 2.6% year on year, and the growth rate remained the same as 2023Q1-3. At the end of 2023, the defective rate was 1.18%, down 4 bps from the end of 2023Q3, the provision coverage rate was 208%, down 2pc from the end of 2023Q3.
Steady revenue growth
According to China CITIC Bank's preliminary accounting for 2023 (same below), net profit attributable to mother increased 7.9% year on year, and the growth rate decreased 1.3 pc from 2023Q1-3; revenue fell 2.6% year on year, and the growth rate remained flat from 2023Q1-3, in line with market expectations.
Looking at the driving factors, the judgment is that under the support of a low base, the growth rate of other non-interest income has rebounded, compounded by an acceleration in scale expansion, to hedge against the downward impact of interest spreads. Looking ahead to 2024, due to common industry factors such as LPR interest rate cuts and weak credit demand, it is expected that China CITIC Bank interest spreads will continue to decline, dragging down a slight negative increase in revenue, but thanks to continued improvements in asset quality, profit growth is expected to maintain a slight positive increase.
Accelerate scale expansion
China CITIC Bank's initial accounting total assets at the end of 2023 increased 5.9% year on year. The growth rate was 2.4 pc higher than at the end of 2023Q3. Scale expansion accelerated, supporting profits.
Asset quality improvement
At the end of 2023, China CITIC Bank initially calculated a defect rate of 1.18%, down 4 bps from the end of 2023Q3. The non-performing rate was at its best level since 2014, and asset quality continued to improve. At the end of 2023, the preliminary accounting provision coverage rate was 208%, a slight decrease of 2pc from the end of 2023Q3, and the provision level remained stable.
Profit forecasting and valuation
China CITIC Bank's revenue was stable and showed poor improvement in 23 years. CITIC Bank's net profit is expected to increase by 3.50%/5.99% year-on-year in 2024-2025, corresponding to BPS of 13.26/14.30 yuan. The current price corresponds to 0.42/0.39 times PB. The target price is 7.31 yuan/share, corresponding to 0.55 times the 2024 PB, and the current price space is 31%, maintaining the purchase rating.
Risk warning: The macroeconomic economy has stalled, and the bad situation has been greatly exposed.