The growth rate of performance has remained stable. The company implemented the new insurance contract standards on January 1, 2023, and adjusted the financial statements for the comparison period. Operating revenue of 843.1 billion yuan was achieved in 2023, down 3.7% year on year on a comparable scale, close to the decline in the previous three quarters; in 2023, net profit to mother was 364 billion yuan, up 0.8% year on year, and the growth rate was the same as the previous three quarters. The 2023 weighted average ROE was 10.7%, down 0.7 percentage points year over year.
The asset growth rate continues the relatively rapid growth trend. At the end of 2023, total assets increased 12.8% year-on-year to 44.7 trillion yuan, and still maintained a relatively rapid growth rate. Among them, deposits increased 12.2% year over year to 33.5 trillion yuan, and loans increased 12.4% year over year to 26.1 trillion yuan. Due to rapid asset growth and increased capital consumption, the core Tier 1 capital adequacy ratio fell 0.32 percentage points to 13.72% at the end of the year compared to the beginning of the year, but it was still far higher than regulatory requirements.
Net interest spreads have declined markedly. The average daily net interest spread disclosed by the company was 1.61%, down 31 bps year on year. The main reason was the narrowing of interest spreads on deposits and loans. Among them, loan yield fell 24 bps to 3.81% year on year, mainly affected by factors such as falling LPR, weak credit demand, and lower stock mortgage interest rates; deposit interest rates rose 14 bps to 1.89% year on year, mainly due to the impact of rising interest rates on public deposits and deposit regularization. Considering its high deposit growth rate and asset growth rate, the increase in deposit interest rates is also quite reasonable. Judging from single-quarter data, the company's average daily net interest spread for the fourth quarter was 1.44%, down 14 bps from the third quarter.
The quality of assets remains stable, and provisions are sufficient. The company's defect rate at the end of 2023 was 1.36%, down 2 bps from the beginning of the year; the attention rate was 1.85%, down 10 bps from the beginning of the year; and the overdue rate was 1.27%, up 5 bps from the beginning of the year.
Our estimated annual bad generation rate was 0.43%, a year-on-year decrease of 9 bps, and marginal generation improved. Overall, the quality of the company's assets is relatively stable, which highlights the steady advantage of the bank. The company still maintains a high level of provision accrual. This year's “provision accrual/bad generation” was 136%, and it is still over accrued.
The company's year-end provision coverage rate was 214%, a slight increase of 10 percentage points from the beginning of the year, and the loan ratio stabilized at 2.90%.
Investment advice: We take into account the slight adjustment of the profit forecast by LPR in February this year and push the profit forecast one year forward. We expect net profit to be 3665/375.5 billion yuan for 2024-2025 (previous forecast value: 3901/415 billion yuan), net profit to mother in 2026, a year-on-year growth rate of 0.7/2.5/4.4%; diluted EPS is 0.99/1.01/1.06 yuan; current stock price corresponding to PE is 5.4/5.3/5.1x, PB is 0.52/0.49/ 0.46x, maintaining a “buy” rating.
Risk warning: The weakening macroeconomic situation may adversely affect the quality of bank assets. Due to the adjustment of the company's accounting standards, some data is not comparable. Please pay attention to changes in caliber.