I. Highlights
Performance has remained steady. The results were basically the same as in the first three quarters. In 2023, the revenue growth rate was -1.6%, up 0.08pct from the previous three quarters. Net profit to mother grew by 6.2%, down 0.29pct from the previous three quarters.
The dividend was impressive, rising to the highest value in history. The cash dividend per share was 1.972 yuan, and the annual dividend ratio increased by 2 pct to 35.01%. The dividend ratio reached the highest value in history, further highlighting the allocation value.
The size of loans has been growing steadily, and consumer loans and small and micro loans have performed well. In 2023, the loan growth rate was 7.67%, which is basically the same as in the previous three quarters. Since the second half of the year, the growth rate of public loans has slowed, and retail loans have accelerated. Among them, consumer loans and small and micro loans have grown rapidly and performed well, which also reflects the bank's “price for volume” consumer loan marketing strategy.
The quality of assets has remained stable, and the real estate defect rate has declined. The non-performing rate fell slightly by 1 bps from the first three quarters, but the attention rate increased by 9 bps. The pressure may be mainly reflected in the retail business, especially in the consumer loan and credit card business. Since the second half of 2023, the non-performing ratio for public loans has declined by 7 bps. Among them, the non-performing rate in the real estate industry has fallen by 26 bps, the non-performing rate in the manufacturing industry has decreased by 17 bps, and asset quality has improved markedly; while the non-performing rate of retail loans has risen by 5 bps, of which the non-performing rate of consumer loans (including credit cards) has risen by 29 bps.
II. Points of interest
Net interest spreads are heavily hampered by retail business. Net interest spreads continued to decline by 4 bps to 2.15% in the fourth quarter. The decline was the same as in the third quarter, and was still the biggest drag on performance. Both the asset and liability sides are facing adverse changes, particularly in the retail business. Since the second half of the year, interest spreads on public deposits and loans have narrowed by 5 bps, and the drag is only on the asset side; however, interest spreads on retail deposits and loans have narrowed drastically by 20 bps, causing simultaneous drag on the asset side and debt side.
Deposit growth has slowed sharply. The deposit growth rate in the fourth quarter was only 8.22%, down 4.34pct from the previous three quarters. The pressure was mainly on retail current deposits. The main reason is that the micro vitality of the economy needs to be improved, and the active investment of enterprises to expand production and residents' demand for leverage is weak, resulting in a low capital activation rate.
Second, the growth rate of commercial bank loans declined 0.3 pct in the fourth quarter, leading to a slowdown in credit creation.
Revenue growth continued to be negative. The decline in non-interest income has narrowed, mainly benefiting from the positive Q4 bond market, investment income, and net exchange earnings. Net income from handling fees and commissions fell 10.78% due to factors such as reduced fees in banking insurance channels and weak capital markets.
Investment advice: Combined with the fine-tuning forecast of the annual report, revenue growth rates for 2024-2026 are expected to be 1.83%, 9.81%, and 9.87%, respectively (previous 2024-2025 was 1.82% and 9.82%), and net profit growth rates to mother are 7.3%, 9.1%, and 9.3%, respectively (previous 2024-2025 were 7.6% and 9.2%).
According to the historical valuation method, as of March 26, 2024, the PB value was below 0.9, and the average PB value for the past 2 years was 1.06. We believe that the valuation is expected to rebound, giving the company 1 times the target PB for 2024, corresponding to the target price of 40.77 yuan, and maintaining the “buy” rating.
Risk warning: The economic downturn exceeded expectations and credit demand was insufficient; wealth management repairs fell short of expectations, dragging down income performance; credit risk fluctuated, and asset quality deteriorated.