On the evening of March 28, 2024, Postbank disclosed its 2023 results. In 2023, it achieved operating income of 342.5 billion yuan, YoY +2.25%; net profit to mother of 86.3 billion yuan, YoY +1.23%; weighted average ROE of 10.85%. By the end of 2023, the asset size was 15.7 trillion yuan, the non-performing loan ratio was 0.83%, and the provision coverage rate was 347.57%.
1. Revenue growth rate increased and ROE decreased.
Revenue in 2023 was 342.5 billion, up 2.25% year-on-year, and the growth rate was 1.01 percentage points higher than 3Q23. Among them, net interest income was $281.8 billion, up 3.00% year on year; net income from handling fees and commissions was 28.3 billion yuan, down 0.64% year on year. After excluding one-off factors in financial management transformation in 2022, intermediate income increased 12.1% year on year; investment income, fair value change profit and loss, and exchange gains and losses totaled $31.3 billion, down 1.84% year on year. Net profit to mother grew by 1.23%, down 1.2 percentage points from 3Q23. The weighted average ROE in 2023 was 10.85%, down 1.04 percentage points from the previous year, mainly due to the completion of a fixed increase of 45 billion dollars in the first quarter of 2023, which temporarily diluted ROE.
2. Assets have maintained rapid growth, interest spreads have declined, and savings agency rates have declined.
AUM continues to grow at a relatively rapid pace. The Postbank built a tiered service system for customers in the entire wealth management chain. At the end of 2023, retail AUM reached 15.2 trillion yuan, an increase of 9.7% year on year; the number of VIP customers, Fujia and above customers was 51.48 and 4.96 million, respectively, up 8.7% and 16.8% year on year. The year-on-year growth rates of assets, loans, and deposits at the end of 2023 were 11.8%, 13.0%, and 9.8%, respectively. The share of loans in assets increased 0.6 percentage points to 51.8% compared to the end of 2022.
Interest spreads have declined. Net interest spread in 2023 was 2.01%, slightly down 4BP from 3Q23 and 19BP from 2022.
On the asset side, due to the decline in LPR and the reduction in interest rates on existing mortgage loans, the yield on loans in 2023 fell 35BP to 4.13% compared to 2022, and the yield on interest-bearing assets fell 26BP to 3.56% from 2022; on the debt side, the interest-bearing debt cost ratio was 1.57%, down 6BP from 2022, with interest rates on deposits falling 8BP.
Savings agent rates have declined further. The savings agent rate in 2023 was 1.24%, down 3BP from 2022.
Starting in November 2022, the savings agency fee tiered rate began to be adjusted, the long-term time deposit rate was lowered, and the short-term deposit rate was slightly raised. In 2023, the average daily balance of savings deposits of agency agents increased by 1.06 trillion yuan, of which 1-year fixed deposit increased by 0.9 trillion yuan. According to the company's announcement, when there is a major change in the interest rate environment, and the average net interest spread of the four major banks of China, agriculture, industry, and construction in the fiscal year falls below 1.64% or above 2.68%, a passive adjustment mechanism for savings agent rates will be triggered. In 2023, the average net interest spread of the four major banks is 1.44%, below 1.64%, or a passive adjustment mechanism for savings agency rates has been triggered, and Postbank costs are expected to drop.
3. The provision is sufficient, and the capital adequacy ratio has increased slightly.
Defects have risen slightly, and provisions are sufficient. By the end of 2023, the non-performing loan ratio was 0.83%, slightly up 2BP from 23Q3 and down 1BP from the end of 2022; the focus loan ratio was 0.68%, slightly up 6BP from 23Q3, up 12BP from the end of 2022; and the overdue loan ratio was 0.92%, down 1BP from 23Q3 and 4BP from the end of 2022. In terms of bad generation, the bad generation rate in 2023 is 0.85%, which is at a low level. The provision coverage rate is 347.57%, which remains high, and the provision is sufficient.
The capital adequacy ratio increased slightly. By the end of 2023, the core Tier 1 capital adequacy ratio/Tier 1 capital adequacy ratio/capital adequacy ratio were 9.53%/11.61%/14.23% respectively. The capital adequacy ratio at all levels was slightly higher than in 23Q3.
Investment advice: Improve the asset structure and make sufficient provisions. The Postbank is a major state-owned bank that is deeply involved in the county area, and has excellent retail resource endowments. Adhere to the retail banking strategy, improve the asset structure, excellent asset quality, and adequate provisions. We maintain a “Highly Recommended” rating.
Risk warning: Interest spreads continue to narrow; retail and wealth management business development falls short of expectations.