Performance growth has been steady, and operating income has maintained positive growth. The company achieved operating income of 342.5 billion yuan in 2023, up 2.3% year on year, up 1.1 percentage points from the previous three quarters; in 2023, net profit to mother was 86.3 billion yuan, up 1.2% year on year, and the growth rate decreased by 1.2 percentage points from the previous three quarters. The 2023 weighted average ROE was 10.9%, down 1.0 percentage point year over year.
The asset growth rate remained at a relatively stable level. At the end of 2023, total assets increased 11.8% year-on-year to 15.7 trillion yuan, and the asset growth rate was close to previous years. Among them, deposits increased 9.8% year over year to 14.0 trillion yuan, and loans increased 13.0% year over year to 8.2 trillion yuan. The company's assets grew rapidly, and the adequacy ratio of core Tier 1 capital fell 0.19 percentage points to 9.52% at the end of the year compared to the completion of the additional issuance at the end of the first quarter.
The net interest spread has declined somewhat. The company disclosed an average daily net interest spread of 2.01% in 2023, a year-on-year decrease of 19 bps.
The company's yield on interest-bearing assets fell 25 bps to 3.56% year on year, with loan yield falling 35 bps to 4.13% year on year, mainly affected by factors such as falling LPR and stock mortgage interest rate adjustments. The interest rate on the company's interest-bearing debt fell 6 bps to 1.57% year on year, with deposit interest rate falling 8 bps to 1.53% year over year, with excellent performance. However, we should also note that the company's savings agency fees increased by 12.4% year-on-year this year, mainly because agency outlets absorbed more personal deposits. Judging from single-quarter data, the company's average daily net interest spread for the fourth quarter was 1.90%, down 9 bps from the third quarter.
The quality of assets remains excellent. The company's defect rate at the end of 2023 was 0.83%, down 1 bps from the beginning of the year; the attention rate was 0.67%, up 9 bps from the beginning of the year; the overdue rate was 0.91%, down 4 bps from the beginning of the year. Our estimated annual bad generation rate was 0.35%, a year-on-year decrease of 2 bps, and marginal generation remained low. Overall, the quality of the company's assets is relatively stable, and its advantages are still obvious. The company's “provision accrual/bad generation” in 2023 was 103%. Although the amount of provision accrual has been reduced, the provision accrual coverage rate at the end of the year was 348%, a decrease of 38 percentage points from the beginning of the year, and the loan ratio was 2.88%.
Investment advice: We consider the recent LPR reduction in profit forecasts slightly and push forward the profit forecast by one year. We expect net profit to return to mother for 2024-2025 of 867/905 billion yuan (previous forecast value of 951/102.3 billion yuan), net profit to mother in 2026 of 94.7 billion yuan, a year-on-year growth rate of 0.5/4.4/ 4.6%; diluted EPS of 0.82/0.86/0.90 yuan; current stock price corresponding to PE is 5.9/5.6/5.4x, and PB is 0.57/0.53/0.50x, maintained “Buy” rating.
Risk warning: The weakening macroeconomic situation may adversely affect the quality of bank assets.