Steady growth in assets and steady progress in strategy
Net profit, revenue, and PPOP in 2023 were -15.6%, -5.2%, and -6.1% year-on-year, compared to -6.1pct, +0.4pct, and +1.6pct in January-September. In 2023, ROE and ROA were -3.21pct and -0.23pct to 10.64% and 0.80%, respectively. We forecast the company's 24-26 EPS to be 3.68/3.73/3.82 yuan, and the 2024 BVPS forecast value is 36.68 yuan, corresponding to 0.44 times PB. Comparatively, the company's 2024 Wind unanimously predicted an average PB of 0.46 times. The company's “green bank, wealth bank, and investment bank” development strategy is clear, and the strategic content should be further deepened. It should enjoy a certain valuation premium, give the 2024 target PB 0.55 times, and the target price is 20.17 yuan to maintain the purchase rating.
The strategy progressed smoothly, and the layout of the five new tracks accelerated
Total assets, loans and deposits at the end of 2023 were +9.6%, +9.6%, and +8.9%, respectively. Compared with +0.4pct, -0.3pct, and -2.7pct at the end of September, the proportion of new loans to public, retail, and notes in Q4 was 13%, 56%, and 31% respectively. The layout of the five new tracks was accelerated. Science and innovation, inclusive, energy, automobile, and park loans were +31.9%, 24.0%, 16.2%, 26.1%, and 27.4%, respectively. Net interest spread for 2023 was 1.93%, down 2 bps from January-September. Estimates were mainly dragged down by the asset side. The 23-year yield on interest-bearing assets and loan yields were 4.00% and 4.57% compared to 5 bps and -24 bps from January to June, respectively. Debt-side costs have improved. The interest-bearing debt cost ratio and deposit cost ratio compared to January-June -1 bp and -2bp to 2.34% and 2.24%, respectively. The deposit demand ratio at the end of 23 declined by 0.9 pct to 36.0% from the end of June.
The middle income base disrupted performance, and other non-interest recovery
Accepting the impact of one-time confirmation of revenue from Cailao products, fluctuations in net revenue from handling fees and commissions (-38.4% year over year). If this factor is excluded, the company's revenue is basically flat. Fee revenue showed structural highlights. Revenue from wealth agency business, investment bank consulting revenue, and revenue from new wealth management products increased by 12.59%, 7.94%, and 1.86%, respectively. At the end of '23, ICBC's wealth management scale reached 2.26 trillion yuan, ranking 2nd in the market, and retail AUM reached 4.79 trillion yuan. The growth rate of other non-interest income picked up, +14.1% year over year, and +16.7pct compared to January-September, supporting revenue growth.
Provisions have been increased, and capital adequacy ratio has increased
At the end of 23, the defect rate and provision coverage rate were 1.07% and 245%, the same as at the end of September, and +7pct, respectively.
23Q4 accrued asset impairment losses of 19.3 billion yuan in a single quarter, +140.3% year-on-year. The credit card risk index fell from a high level. The non-performing rate at the end of 23 was 3.93%, compared to -1 bp at the end of June. The estimated annual failure rate in 23Q4 was 0.99%, a decrease of 0.08pct compared to 23Q3, and the forward-looking risk index improved. Credit costs in 2023 were 1.44%, +0.79pct YoY. At the end of 23, the capital adequacy ratio and core Tier 1 capital adequacy ratio were 14.13% and 9.76% respectively, +0.35pct and +0.29pct, respectively, compared to the end of September. It is proposed to pay a dividend of $1.04 per share in 2023, with an annual cash dividend ratio of 29.64% (2022:28.31%) and a dividend ratio of 6.40% (2024/3/28).
Risk warning: Economic recovery fell short of expectations, and the deterioration in asset quality exceeded expectations.