Societe Generale discloses 2023 results. In '23, we achieved operating income of RMB 210.831 billion, YoY -5.19%; net profit to mother of RMB 77.116 billion, YoY -15.61%; and an annualized weighted average ROE of 10.64%. By the end of 2023, the asset size was 10.16 trillion yuan, the non-performing loan ratio was 1.07%, the provision coverage rate was 245.21%, and the loan ratio was 2.63%.
1. Profit growth rate declined, and revenue declined significantly
Profit growth declined. In '23, we achieved operating income of RMB 210.831 billion, down 5.19% year on year, up 0.4 percentage points from 3Q23; net profit to mother of RMB 77.116 billion, down 15.61% year on year, and profit growth rate decreased 6.08 percentage points from 3Q23. Among them, net interest income was 146.5 billion yuan, up 0.85% year on year. The decline in profit was mainly due to a decline in non-interest income. According to Societe Generale Bank's performance report, due to the high base of one-time confirmation of earnings from old financial management products in 2022, the revenue growth rate in 23 was negative. Excluding one-time factors, the revenue growth rate in 23 was 0.94%.
The share of other non-interest income has increased, and there has been a decline in revenue. Non-interest income in '23 accounted for 30.51%, down from '22 (34.7%). Net revenue from handling fees and commissions decreased by 33.04% year on year, mainly due to confirmation of one-time income from Cailao products; other non-interest net income was 36.57 billion yuan, an increase of 14.08% year on year.
The share of other non-interest income in fiscal year 23 increased 6.56 percentage points to 17.35% compared to fiscal year 20.
ROE declined year over year. The 2023 weighted average ROE was 10.64%, down 3.21 percentage points year over year, and ROE declined.
2. The decline in interest spreads has narrowed, and the size of deposits and loans has grown steadily
The decline in interest spreads has narrowed. Net interest spread in '23 was 1.93%, down 17BP year-on-year, mainly due to a decline in LPR and a decline in yield on interest-bearing assets. The yield on 23-year interest-bearing assets was 4%, down 14BP year on year, and the performance was better than comparable peers; the cost ratio of interest-bearing debt was 2.34%, up 3BP year on year. Affected by several LPR cuts, loan pricing declined and interest spreads narrowed.
The size of deposits and loans has grown steadily. By the end of '23, total assets, loans, and deposit amounts were 10.16, 5.46, and 5.14 trillion yuan respectively, up 9.62%, 9.59%, and 8.45% from the beginning of the year.
3. Focus on the increase in loan ratios, and provision is basically stable
The defect rate remained flat, and the attention rate increased. By the end of 2023, the non-performing loan ratio was 1.07%, down 2BP from the end of '22, the same as 23Q3; the balance of concerned loans was RMB 84.449 billion, accounting for 1.55%, up 2BP from 23Q3, and up 6BP from the end of '22. The overdue loan ratio was 1.36%, down 31 BP from the end of '22.
The provision is generally stable. The provision coverage rate for 2023 was 245.21%, up 7.43 percentage points from 23Q3; the loan ratio was 2.63%, up 0.08 percentage points from 23Q3.
The capital adequacy ratio increased slightly from month to month. By the end of 2023, the core Tier 1 capital adequacy ratio, and Tier 1 capital adequacy ratio were 9.76%/10.93%/14.13% respectively, up 0.29, 0.35 percentage points from 23Q3.
Investment advice: Industrial Bank adheres to the Wealth Bank strategy, has stable asset quality, narrowing interest rate reduction, and stable provisions. Excluding one-off factors, Industrial Bank's revenue growth rate in '23 was 0.94%, but due to a significant decline in profit growth, we lowered our 24/25 profit growth rate to -0.2%/1.6%. We gave it a target valuation of 0.55 times 24-year PB, corresponding to 20.8 yuan/share. The current valuation is low. As of March 29, '24, PB (LF) was only 0.46 times, maintaining a “highly recommended” rating.
Risk warning: financial concessions, narrowing interest spreads; wealth management development falls short of expectations, etc.