The profit of the Stock Exchange 2023A remains stable, the dividend ratio remains high, and the dividend performance ratio is outstanding.
Overview of the data
Bank of Communications 23A's net profit increased 0.7% year on year, down 1.2pc from 23Q1-3; revenue increased 0.3% year over year, and the growth rate decreased by 1.4pc month on month. Bank of Communications's defect rate at the end of 23A increased slightly by 1 bps to 1.33% from the end of 23Q3, and the provision coverage rate decreased by 4pc to 195% compared to the end of 23Q3.
Profitability remains stable
Net profit from CCB 23A increased 0.7% year on year, down 1.2pc from 23Q1-3; revenue increased 0.3% year over year, and the growth rate decreased by 1.4pc month-on-month. The decline in profit growth was mainly due to the increase in interest spreads and the middle income drag.
(1) Interest spread: 23Q4 Bank's net interest spread (daily average) for a single quarter decreased by 5 bps to 1.22% month-on-month, dragging down profits.
(2) Revenue: Affected by common industry factors such as capital market fluctuations and drop in consignment rates, 23A transaction's revenue fell 4% year on year, and the decline was 2 pc larger than 23Q1-3. Looking ahead, due to the decline in interest spreads in the industry, it is expected that the profit of the Stock Exchange in 2024 will still face some pressure.
Debt cost improvement
The net interest spread (average daily) for the 23Q4 quarter fell 5 bps to 1.22% month-on-month compared to 23Q3. Specifically: (1) In 23Q4, the return on the asset side (early end of the period) fell 12 bps to 3.53% month-on-month, mainly due to the decline in loan interest rates under the influence of stock mortgage interest rate cuts. (2) The 23Q4 debt-side cost ratio (early/end of period) improved by 5 bp to 2.64% month-on-month. The improvement in debt costs was judged to be related to actively reducing high-cost deposits, especially high-cost regular public deposits. Bank deposit balances fell 1% month-on-month at the end of 23Q4. Among them, the estimated time deposit balance decreased 2.5% month-on-month and the balance of public deposit decreased 3.0% month-on-month.
Fluctuations in asset quality
At the end of transaction 23Q4, the defect rate, and the overdue rate were +1 bps, basically flat, and +5 bps to 1.33%, 1.51%, and 1.38%, respectively, and the overdue rate fluctuated. Looking at the details, there has been an increase in overdue rates for both public and retail sales. (1) On the public side, the overdue rate at the end of 23Q4 increased by 5 bps to 1.20% compared to the end of 23Q3. The judgment was mainly related to the continued release of risks in the public real estate sector. The bad rate for public real estate at the end of 23Q4 was 4.99%, up 160 bps from the end of 23H1; (2) on the retail side, the overdue rate rate at the end of 23Q4 increased by 5 bps to 1.93% month-on-month compared to the end of 23Q3. Among them, the credit card overdue rate at the end of 23Q4 increased by 13 bps month-on-month compared to the end of 23Q3. Operating loan overdue rate increased month-on-month 21bp.
Dividends remain high
In 2023, the Bank of Trade and Communications announced a dividend ratio of 32.7%, which is stable compared to 2022, and the dividend ratio remains high. Corresponding to the 2023 dividend rate of 5.83% (as of the close of March 27, 2024), the dividend value ratio is outstanding.
Profit forecasting and valuation
The Bank's profit in 2023 remained stable, the dividend ratio remained high, and the dividend cost ratio was outstanding. Net profit to mother is expected to increase by 0.28%/4.10%/6.79% year-on-year in 2024-2026, corresponding to BPS 13.07/13.90/14.80 yuan.
The current price corresponds to 0.49 times the 2024 PB valuation. The target price is 7.36 yuan/share, corresponding to 0.56 times the 2024 PB, and the current price space is 14%, maintaining the “buy” rating.
Risk warning: The macroeconomic economy has stalled, and the bad situation has been greatly exposed.