Incident: Agricultural Bank released its 2023 annual report, achieving revenue of 694.8 billion yuan, yoy +0.03%; net profit to mother of 296.4 billion yuan, yoy +3.91%; weighted average ROE of 10.9%, yoy-38bp; non-performing rate 1.33%, -4 bps compared to the end of the previous year; provision coverage rate of 304%, +1.27pct compared to the end of the previous year. On the same day, it was announced that a dividend of $2.31 will be paid for every 10 shares, with a 3/29 dividend rate of 5.46% and a dividend rate of 30%, which will remain stable.
Operating capacity is steady, and net profit has maintained positive growth. Agricultural Bank 2023/4Q23 revenue was 694.8 billion yuan/161.5 billion yuan, yoy +0.03%/+1.92%. 2023/4Q23 net profit to mother was 269.4 billion yuan/62 billion yuan, yoy +3.91%/+0.50%. Net interest spread of 1.60% in 2023 was -30bp/-2bp at the end of 2023/3Q23, respectively. The margin of decline narrowed. Net interest income in 2023 yoy -3.07%. Among them, net interest income was +63.7 billion yuan year-on-year due to growth in scale, and net interest income was -81.8 billion yuan due to lower LPR and higher interest payment rates. Non-interest net income yoy +17.5%, mainly due to increased investment and exchange earnings.
Continued to be deeply involved in county finance, and the scale of credit grew rapidly. The annual average interest-bearing asset balance was +15.6% year-on-year, and the average yield was 3.41% /yoy-16bp, mainly dragged down by the average loan yield of -30 bps.
The total loan at the end of the period was 22.6 trillion yuan, +14.4% compared to the end of the previous year. The agricultural bank network layout and business process continued to be optimized. The proportion of county outlets increased to 56.4%, with an annual increase of 8.78 trillion yuan, an annual increase of 1.45 trillion yuan; the company's loan balance was +19.1% compared to the end of the previous year. Among them, the balance of loans to public real estate was +3.07% compared to the end of the previous year, accounting for 4.06% /-0.45pct compared to the end of the previous year. Personal loan balances were +6.82% compared to the end of the previous year; personal housing/operation/consumption/credit/Huinong e-loan balances were -3.29%/+29.3%/+70.3%/+8.09%/+45.1 percent respectively. The growth in consumer loans and Huinong e-loans was mainly due to increased product improvement and marketing efforts, and the increase in personal business loans was mainly due to increased investment in inclusive loans.
The periodization of deposits increases the interest payment cost rate. The deposit balance at the end of 2023 was 37.8 trillion yuan, +15.0% compared to the end of the previous year, and the county deposit balance was 12.3 trillion yuan, +14.2% compared to the end of the previous year; company/individual term deposits were +37.5%/+23.3% of all deposits, accounting for +2.9pct/2.4pct compared to the end of the previous year, driving an average interest rate of +12 bps to 1.96%.
Investment and exchange earnings support the growth of non-interest income. At the end of 23, the company's net revenue from fees and commissions was $80.1 billion, yoy -1.5%, of which revenue from consultants and consulting fees was yoy +11.3%, which was the main increase, mainly due to an increase in processing fee revenue related to syndicated loans; agency fees yoy -14.7% were the main drag, mainly a decrease in agency financial management business revenue. Among other non-interest income, net income from investment income and fair value changes was 30.8 billion yuan, yoy +35.7%. Exchange income increased 10.3 billion yuan year-on-year, mainly due to foreign exchange fluctuations, which led to an increase in exchange income from related businesses.
The quality of assets is good, and provision coverage is high among major banks. At the end of 23, the non-performing loan ratio was 1.33%, which was -4 bp/-2bp at the end of the previous year/end of 3Q23, respectively; at the end of 2023, the non-performing ratio for medium- to long-term loans to the public sector was 1.71%, or -5 bp year-on-year. Among personal loans, the deficient overdraft rates for housing/operation/benefit/consumption/personal card were 0.55%/0.76%/0.96%/1.04%/1.4%, respectively, compared to the end of the previous year, +4bp/+11bp/+16bp/-21bp/+17bp, respectively. At the end of 2023, the company's provision coverage rate was 304%, +1.27pct/-0.25pct compared to the end of the previous year/end of 3q23, respectively.
Investment advice: First coverage gives a “recommended” rating. The Agricultural Bank has been steadily implementing the “three major strategies” of “three rural areas” of inclusiveness, green finance, and digital management. Management efficiency continues to be released, operations are becoming more steady, risk management capabilities continue to be enhanced, and asset quality is excellent. We forecast revenue for 2024-2026 to be 689 billion/697.9 billion yuan/715.6 billion yuan, respectively, -0.8%/+1.3%/+2.5% year-on-year; net profit to mother of 276.2 billion /887.4 billion yuan/302.1 billion yuan, respectively, +2.5%/+4.1% year-on-year. The closing price on March 29 corresponding to the 2024-2026 PB was 0.57 /0.52 /0.47 times.
Risk warning: macroeconomic recovery falls short of expectations; industry policy changes drastically; corporate strategy progress falls short of expectations.