Incident: Everbright Bank released its 2023 annual report, achieving revenue of 145.7 billion yuan, yoy -3.92%; net profit to mother of 40.8 billion yuan, yoy -8.96%; weighted average ROE of 8.38%, yoy-1.89pct; non-performing rate of 1.25%, the same as at the end of the previous year; provision coverage rate of 181.27%, compared with -6.66pct last year. On the same day, it was announced that it would pay 1.73 yuan for every 10 shares, with a cash dividend ratio of 28.41%, +34bps year-on-year, and a dividend rate of 5.54% on 3/28.
Revenue is under pressure, and increased reserve planning efforts are dragging down net profit. Everbright Bank's 2023/4Q23 revenue was 145.7 billion yuan/33.5 billion yuan, yoy -3.92%/-2.62%. Net profit for 2023/4Q23 was 40.8 billion yuan/3.1 billion yuan, yoy -8.96%/-62.2%. Mainly to consolidate the foundation of asset quality control, the group increased its provision plan efforts. In 2023, asset impairment losses were calculated at 52.1 billion yuan, yoy +2.96%. Net interest spread in 2023 was 1.74%, -27bp/-8bp compared to 2022/1H23, respectively. Net interest income yoy -5.43% in 2023 was mainly affected by the scale of interbank deposit, merger and sale repurchase payments and a double increase in interest rates. Interest expenses yoy +12.3% dragged down net interest income; non-interest net income yoy +0.60%, mainly contributed to growth from investment income and income from changes in fair value yoy +20.1%.
Corporate loans and personal operating loans are growing rapidly, and personal deposits continue on a regular basis. At the end of 2023, the principal amount of loans and advances reached 3.79 trillion yuan, +6.01% compared to the end of the previous year; corporate loans were +12.5%, the main increase, with real estate loan balances -7.22% compared to the end of the previous year; manufacturing loans, strategic emerging industry loans, technology-based enterprise loans and green loans were +24.7%, +46.7%, +50.6%, and +57.4%, respectively, compared with the end of the previous year. Personal loans reached 1.51 trillion yuan, -0.43% at the end of the previous year; among them, personal operating loans grew faster, and personal housing/operation/consumer loans were -0.96%/+16.4%/-6.12% respectively at the end of '22. Customer deposits at the end of 2023 reached 4.09 trillion yuan, +4.53% compared to the end of '22. Among them, the size of retail customer time deposits was +2.48% compared to the end of the previous year, which was the main contribution.
Wealth management is growing steadily, supported by other non-interest income. At the end of 2023, retail finance AUM reached 2.73 trillion yuan, +12.4% over the end of the previous year, and the wealth management business developed steadily. Net revenue from handling fees and commissions in 2023 was $23.7 billion, yoy -11.39%, of which bank card service revenue was $112 billion and yoy -14.5%, which was the main drag. Agent insurance fee revenue yoy +43.7%, which is a good performance. Among other non-interest income, net investment income and fair value changes totaled 11.7 billion yuan, yoy +20.1%. This was the main growth item in non-interest income, and net exchange income yoy +132% also provided some support for non-interest income.
The defect rate remained stable, and provision coverage increased marginally. The non-performing loan ratio in 2023 was 1.25%, the same as at the end of the previous year, -10 bps at the end of 3Q23; the balance of non-performing loans to public debt was -4.45% compared to the end of the previous year; and the balance of personal non-performing loans was +24.4% compared to the end of the previous year, which was the main drag. By industry, the manufacturing non-performing balance was -45.3% compared to the end of the previous year, which was the main improvement industry. The non-performing real estate balance was +27.1% compared to the end of the previous year, but the scale of real estate loans declined, and the overall risk is expected to be manageable. The company's provision coverage rate was 181%, a marginal improvement from -6.66pct/+5.62pct at the end of 22/3Q23, respectively.
Investment advice: First coverage gives a “recommended” rating. Everbright Bank insists on anchoring the three major North Star indicators of FPA, AUM, and GMV. Retail finance highlights “wealth management” and “fintech”; the company increased its reserve planning efforts in '23, further consolidating the foundation of asset quality control. We forecast revenue for 24E/25E/26E to be 144.4 billion/455 billion yuan, or -0.8%/+3.9% year-on-year, respectively; realized net profit to mother of 38.5 billion/37.8 billion yuan/39.9 billion yuan, respectively, -5.7%/-1.8%/+5.7% year-on-year respectively. On March 28, 2024, the closing price was 3.12 yuan/share, and the PB corresponding to 24E/25E/26E was 0.33/0.31/0.28 times.
Risk warning: macroeconomic recovery falls short of expectations; industry policy changes drastically; corporate strategy progress falls short of expectations.