Continued growth in scale and optimization of deposit costs
Net profit, operating income, and PPOP in 2023 were +0.8% (restated), -3.7% (restated), and -5.2% (restated), respectively. The growth rates were the same as in the previous three quarters, -0.2pct, and +1.1pct. A dividend of $0.31 per share is proposed in 2023, with an annual cash dividend ratio of 31% (2022:31%) and a dividend ratio of 5.70% (2024/3/27). Given the slowdown in revenue growth, we forecast EPS of RMB 1.03/1.04/1.08 yuan for 24-26, RMB 10.27 for BVPS for 24-26, and 0.52/0.36 times PB for A-Shares/H Shares. The company's leading position is stable. Compared with the company's 24-year consistent expected average (0.55/0.37 times PB), A shares/H shares should enjoy a certain valuation premium. We have given A/H shares a 24-year target PB0.69/0.49 times, and A/H shares have a target price of 7.09 yuan/5.45 HKD, maintaining a buy/buy rating.
The scale continues to grow, and the GBC project continues
The growth rates of total assets, loans, and deposits at the end of 23 were +12.8%, +12.4%, and +12.2%, respectively. Compared with +0.4 pct, -0.1 pct, and -0.7 pct at the end of September, assets continued to grow. In Q4, 52%, 38%, and 10% of the new loans were made to public, bills, and retail. Credit support for the real economy continued to increase. The balance of manufacturing loans reached 3.8 trillion yuan in 2023, an increase of 27.3% over the end of the previous year. Domestic medium- and long-term corporate loans accounted for 47.8% of total loans in 2023 compared to the end of 2022 by +1.8pct. The GBC project progressed further, and the formation of a diversified customer structure accelerated. The number of G-end users grew +89% year-on-year, and the number of B-side users increased 22% year-on-year.
Deposit cost optimization, investment income growth
Net interest spread for 2023 was 1.61%, -11 bps compared to the first half of the year and -6 bps compared to the previous three quarters. The return on interest-bearing assets and the cost ratio of interest-bearing debt in 2023 were 3.45% and 2.04%, respectively, the same as -11 bps in the first half of the year. Loan yields in 2023 fell 14bps from 23H1. The 23-year deposit cost rate was 1 bps lower than 23H1, and deposit costs were optimized. The deposit balance rate at the end of June 23 was -1.4pct to 40.8% compared to the end of June. Non-interest revenue in '23 was +2.3% YoY, up 1.8 pct from the previous three quarters. Mid-year business revenue in '23 was -7.7%, and the growth rate was -1.6 pct compared to the previous three quarters. The slowdown in revenue growth was mainly due to fluctuations in personal finance, private banking, and public financial management businesses. Other non-interest income was +26.2% year-on-year in '23. The growth rate was +9.4pct compared to the previous three quarters, and investment income improved.
Stable asset quality and declining credit costs
The 23-year non-performing rate was 1.36%, the same as at the end of September. The provision coverage rate was 214%, and -2pct compared to the end of September.
Concerned loans accounted for +6bp at the end of 23H1, and the hidden risk index fluctuated. The non-performing loan ratio for public loans decreased by 2bps to 1.81% at the end of 23H1. The non-performing real estate loan ratio declined by 1.31 pct from the end of 23H1, and asset quality improved in key areas. The personal loan non-performing ratio increased by 4 bps compared to the end of 23H1, mainly due to fluctuations in the quality of credit card assets. The Q4 bad generation rate in a single quarter was 0.31 pct lower than in Q3; the annualized credit cost in Q4 was 0.05%, -0.18 pct year on year, driving profit release.
Risk warning: Economic recovery fell short of expectations, and the deterioration in asset quality exceeded expectations.