Core views:
The Postbank released its 2023 annual report. Our comments are as follows: Revenue, PPOP, and net profit to mother increased by 2.3%, -7.1%, and 1.2% year-on-year respectively. The growth rates changed by +1.01pct, +1.76pct, and -1.22pct from 23Q1 to 3, respectively. Judging from the cumulative performance driver, scale growth and provision estimates are the main positive contributions, and factors such as narrowing net interest spreads and rising cost to revenue ratios are a drag.
Highlights: (1) Loan size continues to grow at a high rate. The year-on-year growth rate of loans in '23 was 13.0%, up 1.3 pct from 23Q1-3. The increase in loans in the single quarter of 23Q4 reached 128.4 billion yuan, an increase of 69.8 billion yuan over the previous year. Structurally, the growth rate for public loans was strong, with a year-on-year growth rate of 20.4%, mainly from manufacturing, infrastructure, specialization and innovation; retail loans increased 10.5% year on year, thanks to the company's continuous increase in credit investment in key areas of rural revitalization. Personal microfinance achieved a high growth rate of 22.6%, and personal housing loan growth was still weak. (2) Stable asset quality.
The 23-year defect rate was 0.83%, the attention rate was 0.68%, and the overdue rate was 0.91%. Compared with the end of 23Q3, there were changes of +2 bp, +6 bp, and -1 bp, respectively. The 23-year bad generation rate was 0.36%, and the provision coverage rate was 347.57%. All indicators remained stable. By sector, the non-performing ratio of personal loans rose by 3 bps compared to 23H1 in '23, with the non-performing rate of personal microfinance loans rising by 11 bps; the non-performing rate for public loans remained low at 0.55%, but there was a marked increase in poor public real estate loans, so pay attention to subsequent risk exposure.
Concern: (1) Interest spreads continue to narrow. The company's net interest spread for 23 years was 2.01%, down 4 bps from 23Q1-3. The return on assets in '23 fell 7 bps from 23H1. Among them, loan yield fell 11 bps, and retail loan yield fell a lot. Affected by factors such as LPR cuts and stock mortgage interest rate adjustments, the high increase in personal microfinance partially offset the impact of interest rate cuts on interest income; a quantitative compensation strategy was adopted for the public sector to respond to steady growth in interest income. The debt cost ratio remained stable. Demand deposits grew negatively in 23, and the trend of regularization continued, but with the optimization of the term structure, at the end of '23, the share of deposits maturing 1 year or more was 9.6%, down 1.1 pct from the previous year. As high-cost time deposits gradually expire, it is expected that the pressure on the company's debt costs will improve markedly in 24 years. (2) Increased cost-to-revenue ratio. The cost-revenue ratio for 23 years was 64.82%, up 3.4 pcts year over year. Mainly, savings agency fees increased by 12.40% year on year due to the increase in the amount of personal deposits absorbed by postal agency outlets. (3) The impact of bank insurance channel fee reduction. After excluding the impact of one-time factors in the transformation of net wealth management products during the same period of the year, net processing fees and commissions increased 12.05% year on year, down 4.1 pct from 23Q1 to 3. The agency business accounted for a relatively high share of company fees, and the impact of bank insurance channel fee cuts will continue to be evident in 24 years.
Profit forecast and investment advice: The net profit growth rate for 24/25 is expected to be 1.3%/1.6%, EPS is 0.83/0.84 yuan/share, respectively. The current stock price corresponds to the 24/25 PE of 5.75X/5.66X, respectively, and the corresponding 24/25 PB is 0.56X/0.52X, respectively. Referring to industry valuations, maintain the company's reasonable value of 7.30 yuan/share, corresponding to 24-year PB of about 0.9X. According to the current AH premium ratio, H shares have a reasonable value of 6.27 HKD/share, all maintaining a “buy” rating.
Risk warning: (1) economic growth has declined beyond expectations; (2) rising deposit costs have exceeded expectations; (3) international economic and financial risks have exceeded expectations; (4) policy regulation has exceeded expectations.