It is predicted that 2023 revenue will drop 8.1% year on year, net profit to mother will drop 28.3% year on year, and SPD Bank released the 2023 performance report. The company predicts that annual revenue will decrease 8.1% year on year, 4Q23 single quarter revenue will decrease 9.6% year on year; net profit to mother for the whole year will decrease by 28.3% year on year; net profit from 4Q23 will decrease 18.6% year on year, and the decline will be significantly narrower than 3Q23 month on month.

Key points of interest

Table expansion accelerated in 4Q23, and growth remained steady throughout the year. By the end of 2023, SPD Bank's total assets exceeded 9 trillion yuan, and total assets and loans increased 3.5% and 2.4% year-on-year. Among them, total assets and loans increased 2.3% and 2.0% month-on-month in 4Q23. Since the fourth quarter of 2023, the company has been guided by a digital intelligence strategy, focusing on the “five major tracks” of technology finance, supply chain finance, inclusive finance, cross-border finance, and financial finance to increase asset investment. Looking ahead, we expect the company to benefit from the Yangtze River Delta home market advantage and achieve high-quality growth in scale.

Asset quality improvements. By the end of 4Q23, the company's loan non-performing ratio was 1.48%, down 4 bps from 3Q23, achieving four consecutive years of decline in both the non-performing rate and bad balance. The loan provision coverage rate was 173.5%, a decrease of 3.5 pct compared to 3Q23, and a cumulative increase of 14.5 pcts compared to the beginning of the year.

The net interest spread for 4Q23 is estimated to have decreased by 5 bps month-on-month. We estimate that the company's 4Q23 simulated net interest spread (operating revenue/average total assets) was 1.82%, a decrease of 5 bps month-on-month. The company's simulated net interest spread for the whole year was 1.96%, a year-on-year decrease of 28 bps.

Profit forecasting and valuation

Keep profit forecasts unchanged. The current stock price corresponds to 0.32x/0.30x 2024E/2025E P/B. Maintaining an industry rating and a target price of 7.65 yuan, corresponding to 0.34x/0.32x 2024E/2025E P/B and 8.9% upward space.

risks

The macroeconomic recovery fell short of expectations, and the pressure to dispose of the company's asset quality exceeded expectations.