The performance growth rate remained stable in 2023. The company implemented the new insurance contract standards on January 1, 2023, and adjusted the financial statements for the comparison period. Revenue for the full year of 2023 was $622.9 billion (YoY, +6.41%), and net profit attributable to mother was $231.9 billion (YoY, +2.38%). Among them, single-quarter revenue for the fourth quarter increased 4.47% year on year, and net profit to mother increased 4.98% year on year. The annual weighted average ROE was 10.12%, down 0.65 percentage points year over year.
The size of assets has continued to expand rapidly. Total assets at the end of the period were 32.43 trillion yuan, up 12.25% from the beginning of the year, and maintained a relatively rapid expansion. Among them, the loan balance was 19.91 trillion yuan, up 13.71% from the beginning of the year; 2.40 trillion yuan was added, an increase of 0.57 trillion yuan over the previous year, mainly due to contributions to public loans.
Net interest spreads remained resilient, and net interest income achieved positive growth. The net interest spread for the full year of 2023 was 1.59%, narrowing by 16 bps year on year. Compared with peers, interest spreads are still resilient. The company's annual net interest income increased 1.58% year over year.
Net interest spreads are still resilient mainly due to the following two factors: (1) the optimization of the RMB balance and liability structure, with the average balance of medium- and long-term loans accounting for 74.1% of mainland RMB loans; (2) the high share of overseas assets, and the improvement in foreign currency interest spreads during the Fed's interest rate hike cycle. On the asset side, the average yield on interest-bearing assets increased 0.22 percentage points to 3.58% year over year, with the average yield on loans increasing 0.07 percentage points year over year to 3.97%. On the debt side, the average cost ratio of interest-bearing debt increased 0.43 percentage points year-on-year to 2.18%. The cost increase was mainly affected by rising deposit costs and deposit regularization trends during the overseas interest rate hike cycle.
Non-interest income increased 23.98% year over year, contributing significantly to revenue growth. Non-interest income for the full year of 2023 increased 23.98% year over year. The Group's net revenue from handling fees and commissions increased 5.31% year over year; other non-interest income increased 51.29% year over year, mainly due to market price fluctuations, and the valuation of bonds measured at fair value and the change included in current profit and loss changed from negative to positive.
Asset quality remains stable. The company's non-performing loan ratio at the end of 2023 was 1.27%, down 0.05 percentage points from the beginning of the year; the provision coverage rate was 191.66%, up 2.93 percentage points from the beginning of the year. Overall, the quality of the company's assets has remained stable. The calculated actual bad generation rate of 0.54% is still low.
Investment advice: The overall fundamental performance of the company is relatively stable. Combined with factors such as the LPR reduction, we slightly lowered the company's profit forecast and pushed it forward by one year. The company's net profit for 2024-2026 is expected to be 2368/2428/25.7 billion yuan (the previous 2024/2025 forecast value is 2556/271.5 billion yuan), corresponding to a year-on-year growth rate of 2.1%/2.6%/3.2%; diluted EPS is 0.76/0.78/0.81 yuan; the PE corresponding to the current stock price is 5.2/5.1/4.9x, PB was 0.49/0.46/0.43x, maintaining a “buy” rating.
Risk warning: Macroeconomic recovery falls short of expectations and will drag down the company's net interest spreads and asset quality.