On the evening of January 29, 2024, Bank of Qingdao disclosed its 2023 performance report. In 2023, it achieved operating income of 12.47 billion yuan, YoY +7.1%; net profit to mother of 3.55 billion yuan, YoY +15.1%; weighted average ROE of 10.71%. By the end of 2023, the asset size was 608 billion yuan, the non-performing loan ratio was 1.18%, and the provision coverage rate was 225.96%.

1. Revenue growth rate increased dramatically, and ROE increased.

Revenue in 2023 was $12.47 billion, up 7.1%, up 5.3 percentage points from 3Q23. The revenue growth rate increased dramatically. On the one hand, due to the low base of the sharp decline in the bond market in the fourth quarter of 2022, revenue in the 23Q4 single quarter was 2.78 billion yuan, up 650 million yuan from the 22Q4 single quarter, and down 550 million yuan from the 23Q3 single quarter; on the other hand, the asset scale maintained rapid growth, and interest spreads were stable. Net profit to mother was 3.55 billion yuan, a year-on-year growth rate of 15.1%, which is basically the same as 3Q23. Profitability increased, and the weighted average ROE in 2023 was 10.71%, up 1.76 percentage points year over year.

2. The scale of assets has maintained a relatively rapid growth rate.

The asset scale stands at 600 billion dollars. As of the end of 2022, total assets, loans and deposit amounts were $608, 3001, and 386.1 billion yuan, respectively, up 14.8%, 11.6%, and 13.1% year-on-year, respectively, and 4.6%, 0.9%, and 1.8%, respectively. Q4 The asset scale increased by 26.1 billion dollars in a single quarter, maintaining a relatively rapid growth rate.

3. Stable asset quality, or increase in capital adequacy ratio.

Asset quality is stable. By the end of 2023, the NPL ratio was 1.18%, slightly up 4BP from 23Q3 and down 3BP from the end of 2022. The provision coverage rate was 225.96%, down 28.71 percentage points from 23Q3, up 6.19 percentage points from the end of 2022; the loan ratio was 2.67%, down 23BP from 23Q3.

Capital adequacy ratio or increase. As of the end of September 2023, the core Tier 1 capital adequacy ratio, Tier 1 capital adequacy ratio, and capital adequacy ratio were 8.37%/10.08%/12.78% respectively, all down from 23H1. According to the company's announcement, under the new capital management measures, the Bank of Qingdao, as a first-tier bank, has increased slightly in its capital adequacy ratio based on static estimates.

Investment advice: The scale of assets has maintained a relatively rapid growth rate, and the revenue growth rate has increased dramatically. Bank of Qingdao is a boutique commercial bank with market-based characteristics. It has good performance, maintained a relatively rapid growth in asset size, stable interest spreads, and stable asset quality. We maintain a “Highly Recommended” rating.

Risk warning: Interest spreads have declined; the economic downturn has exceeded expectations, and asset quality has deteriorated.