Stable asset quality and impressive return on investment
CCB's net profit, revenue, and PPOP in 2023 were +2.4%, -1.8%, and -2.3%, respectively, compared to January-September, -0.7pct, -0.5pct, and +0.2pct, respectively (adjusted by data for '22). ROA and ROE year over year 23 were -0.09pct, -0.74pct to 0.91%, 11.56% year-on-year. We forecast an EPS of 1.35/1.38/1.43 yuan for 24-26, and a BVPS of 12.75 yuan for 24-26. A/H shares correspond to 0.54/0.35 times PB. A/H shares are comparable to the 24-year wind, which consistently expects PB 0.53/0.37 times. The company's “new finance” continues to advance, starting a second growth curve, and should enjoy a valuation premium. We gave A/H shares a 24-year target PB0.70/0.45 times, and A/H shares had a target price of 8.93 yuan/6.21 HKD, all maintaining a “buy” rating.
Steady expansion of assets and steady progress of strategy
CCB's year-end assets, loans, and deposits were +10.8%, +12.6%, and +10.5%, respectively, compared with +0.4 pct, -0.5 pct, and -1.9 pct at the end of September, respectively. In Q4, retail and notes accounted for 21% and 80% of the new loans, respectively, and there was a slight contraction in public loans. Key strategies progressed steadily. At the end of '23, housing rental loans, inclusive finance loans, agricultural loan balances, and green loan balances were +34.4%, +29.4%, +27.1%, and +41.2%, respectively. Net interest spread in 2023 was 1.70%, compared to January-September-5 bps. The asset side was the main drag. The yield on loans in '23 and the yield on interest-bearing assets compared to January-June -12 bps and -8 bps to 3.82% and 3.45%, respectively. The deposit cost ratio remained flat at 1.77% compared to January-June. Deposit periodization continues, and the demand rate at the end of June 23 fell further by 2.9 pct to 43.5% from the end of June.
Credit card contributions have increased, and others are impressive
Non-interest income in 2023 was +8.9% year-on-year. Compared with the January-September growth rate of +2.5pct, other non-interest income performance was superior.
Net revenue from fees and commissions in 2023 was -0.3% year-on-year, compared to January-September. Bank card fee revenue was +23.2% year-on-year, mainly due to the excellent performance of the credit card business. However, due to capital market fluctuations, the scale of financial management and trust products declined, and asset management business revenue was -34.0% year-on-year. Agency business revenue was -1.8% year-on-year. Among them, revenue from escrow funds declined due to market fluctuations and fee cuts, and agency insurance revenue increased year-on-year. Other non-interest income in '23 was +53.1% year-on-year, +13.1pct compared to the January-September growth rate.
Mainly due to investment income and exchange gain/loss +15.3% and +556.0% year-on-year, respectively.
Asset quality is stable, and dividend rates are rising steadily
At the end of 23, the company's non-performing rate and provision coverage rate were 1.37% and 240%, respectively. Compared with the end of September, they were flat and -3pct, respectively, and overall asset quality remained stable. At the end of 23, the attention rate was 2.44%, compared to -6bp at the end of June. The estimated annual poor generation rate in 23Q4 was 0.39%, a slight increase of 2 bp over Q3. 23Q4 annualized credit costs were 0.22%, down 4 bps year over year. In 2023, the company plans to pay 0.40 yuan per share, with an annual cash dividend ratio of 30.1% (2022:30.0%), and a dividend ratio of 5.86% (2024/3/28). At the end of 23, the company's core Tier 1 capital adequacy ratio and capital adequacy ratio were +0.23pct and +0.38pct at the end of September to 13.15% and 17.95%, respectively.
Risk warning: Economic recovery fell short of expectations, and the deterioration in asset quality exceeded expectations.