The growth rate of performance is steady. The company achieved operating income of 63.704 billion yuan in 2023, an increase of 4.2% over the previous year, and achieved net profit of 15.048 billion yuan in 2023, an increase of 10.5% over the previous three quarters. The weighted average ROE in 2023 was 9.42%, up 0.4 percentage points year over year.
The company increased its bond allocation, and its total assets expanded at an accelerated pace to achieve quantitative price compensation. The company's total assets at the end of 2023 were 3.14 trillion yuan, up 19.9% from the beginning of the year, and the asset growth rate increased. Among them, the loan balance at the end of the period was 1.72 trillion yuan, up 12.54% from the beginning of the year, and remained at a relatively stable level. The increase in total asset growth is mainly due to the company increasing its bond allocation. Financial investment at the end of the period accounted for 31.83% of total assets, an increase of 3.16 percentage points over the beginning of the year. The deposit balance at the end of the period was 1.87 trillion yuan, up 11.13% from the beginning of the year. The deposit growth rate slowed slightly, mainly due to the trend of deposit regularization, and the company optimized debt management.
Debt cost control was strengthened, and net interest spreads narrowed by 20 bps year over year; non-interest income achieved relatively good growth. Despite the high increase in scale, the company's net interest income increased by only 0.99% year-on-year due to the narrowing of net interest spreads. Benefiting from the rapid expansion of bond assets, net non-interest income for the whole year increased 15.35% year over year. The net interest spread disclosed in 2023 was 2.01%, a year-on-year narrowing of 20 bps, mainly affected by the decline in loan interest rates. The yield on interest-bearing assets fell 21bps to 4.16% year over year in 2023, with loan yield falling 25 bps to 5.12% year over year. The company actively optimizes debt cost control. Deposit costs decreased by 5 bps to 2.24% year on year in 2023, and the interest-bearing debt cost ratio stabilized at 2.35% due to rising interbank financing costs.
The primary strategy for weakly sensitive assets in the economic cycle has been implemented in depth. Weakly sensitive assets achieved revenue of 20.085 billion yuan, accounting for 33.02% of the bank's revenue. Among them, small diversified assets contributed 20.02%, weak-cycle industry assets contributed 3.86%, and CSA's total customer service business (wealth management, FPA, FICC, etc.) contributed 9.14%.
Asset quality indicators are improving across the board, and pressure on provision plans has declined. The year-end defect rate was 1.44%, down 3 bps from the beginning of the year; the attention rate was 2.04%, down 37 bps from the beginning of the year; the overdue rate was 1.62%, down 35 bps from the beginning of the year; the estimated annual bad generation rate was 0.95%, which was basically the same as the previous year, and the overall asset quality index improved.
As a result, the company reduced its provision accrual efforts, and asset impairment losses fell 5.57% year over year. However, benefiting from poor improvements, the end-of-period provision coverage rate was 183%, an increase of about 1 percentage point from the beginning of the year.
Investment advice: Due to the slow recovery of the economy and policies continue to guide interest rates downward, interest rates on banking loans will face continuous downward pressure in the future. However, the quality of the company's assets has greatly improved, and the pressure to raise reserves has been reduced.
As a result, we only slightly lowered our 2024-2026 net profit to 164/182/202 billion yuan (2024-2025 original forecast value of 171/19.3 billion yuan), corresponding to a year-on-year growth rate of 9.3%/10.7%/10.8%; diluted EPS was 0.58/0.65/0.72 yuan; PE corresponding to the current stock price was 4.7/4.3/3.8x, and Pb was 0.44/0.41/0.38x, maintaining the “gain” rating.
Risk warning: The weakening macroeconomic situation may adversely affect the quality of bank assets.