Incident: On the evening of March 27, Everbright Bank released its 2023 report: in 2023, it achieved operating income of 145.685 billion yuan (YoY -3.92%), realized net profit to mother of 40.792 billion yuan (YoY -8.96%), and an annualized weighted average ROE of 8.38%.
Comment:
The expansion of tables in key areas has been accelerated, and the scale of contributions to the public sector has increased. By the end of 2023, Everbright Bank's total assets reached 6.77 trillion yuan, up 7.5% year on year. The growth rate was slightly slower than at the end of Q3.
Among them, the total amount of loans at the end of 2023 was 3.79 trillion yuan, up 6% year on year, up from the end of Q3. Everbright Bank focuses on the modern industrial system, promotes the high-quality development of financial credit, and promotes the integration of “commercial bank+investment bank+private bank”. The growth rate of various key areas and weak links was faster than that of general loans: science and technology innovation loans, manufacturing loans, inclusive small and micro enterprise loans, and green loans increased by 50.64%, 24.18%, and 57.44% year-on-year respectively. At the retail level, focus on the four core businesses and build a full chain of big wealth management ecosystems covering “wealth management, asset management, and asset trusteeship” as the core. Retail AUM was 2.73 trillion yuan, up 12.42% from the end of the previous year. Private sector customers achieved double-digit growth for four consecutive years, and the pension escrow scale increased 19.60% over the end of the previous year. At the end of 2023, Everbright Bank's total deposits increased 4.6% year over year, up from the Q3 growth rate.
Q4 The decline in revenue growth in a single quarter narrowed, and the growth rate of net investment income increased. Q4's revenue for the single quarter was -2.62% year over year. The decline narrowed compared to Q3 (yoy -8.02%), mainly due to a drag on net income from Q4 interest. However, the net return on investment in Q3 and Q4 was good, with year-on-year increases of 30.4% and 72.2%, respectively, contributing to revenue. The net interest spread in 2023 was 1.74%, down 8BP from the first half of the year. It was mainly affected by factors such as repricing loan interest rates, declining interest rates on newly issued loans, and interest rate adjustments on stock housing loans due to multiple LPR cuts last year. Currently, the banking industry focuses on supporting the real economy, and interest rates on bank loans are in a downward phase. We believe that in the next step, active fiscal and monetary policies are expected to continue to increase. It is expected that real estate and other risks will gradually be resolved, commercial bank interest spreads are expected to stabilize, and performance indicators are expected to be repaired. The year-end non-performing rate was down 10BP from the end of Q3, and core capital was further consolidated. At the end of 2023, Everbright Bank's non-performing loan ratio was 1.25%, down 10BP from the end of Q3. Everbright Bank continues to increase its provision and improvement efforts, consolidate the foundation of asset quality control, and enhance its ability to deal with various risks.
Everbright Bank's capital was further consolidated. The core Tier 1 capital adequacy ratio, and Tier 1 capital adequacy ratio were 9.18%, 11.36%, and 13.5% respectively, compared to +0.07pct, +0.08pct, and +0.08pct at the end of Q3, respectively. Mainly, it actively replenished capital during 2023, successfully converted 16.9 billion yuan of convertible bonds into shares, and issued 15 billion yuan of secondary capital bonds to further contribute capital.
Profit forecast: Everbright Bank is actively promoting the comprehensive development of public and private businesses, focusing on wealth management business. The scale expansion of retail AUM is accelerating, capital indicators continue to improve, and asset quality is expected to improve steadily. We expect Everbright Bank's net profit growth rates to mother of 8.86%, 9.74%, and -1.45% respectively in 2024-2026.
Risk factors: risks brought about by business transformation; stricter regulatory policies; risk of declining economic growth