Agricultural Bank disclosed 2023 results: operating income of 694.828 billion yuan, YoY +0.03%; net profit to mother of 269.820 billion yuan, YoY +3.90%; annualized weighted average ROE of 10.91%. By the end of 2023, the asset size was 39.87 trillion yuan, the non-performing loan ratio was 1.33%, and the provision coverage rate was 303.87%.
1. Stable performance and slight decline in ROE
Revenue growth picked up slightly, and other non-interest income grew faster. Revenue growth in 2023 was 0.03%, up 0.57 percentage points from 3Q23. Among them, net income from handling fees and commissions was $80.1 billion, down 1.5% year on year; net interest income was $571.75 billion, down 3.1% year on year; and other non-interest income was 43 billion yuan, up 83% year on year.
Profit growth declined slightly. Net profit growth rate in 2023 was 3.90%, down 1.07 percentage points from 3Q23. Loan impairment losses in 2023 were 138.9 billion yuan, a year-on-year decrease of 2.1 billion yuan, and provision increases decreased slightly year-on-year.
ROE declined slightly year over year. The weighted average ROE in 2023 was 10.91%. ROE fell 0.37 percentage points year over year, and ROE declined slightly.
2. Interest spreads have declined, and county deposits and loans have continued to rise
Interest spreads have declined. The net interest spread in 2023 was 1.60%, down 30BP from '22, and the net spread was 1.45%. It was mainly affected by supporting the real economy, LPR cuts, and continued repricing of stock assets such as personal housing loans, etc., the return on interest-bearing assets declined; and the increase in interest rates on interest-paying liabilities due to the market environment. The yield on 23-year interest-bearing assets was 3.41%, down 16BP year on year; the cost ratio of interest-bearing debt was 1.96%, up 12 BP year on year.
County deposits and loans continued to rise. By the end of 2023, the county's loan balance was 8.78 trillion yuan, up 19.8% from the end of '22, with an annual increase of 1.45 trillion yuan, accounting for more than 50% of the total loan increase. At the end of '23, the county absorbed 12.33 trillion yuan in deposits, an increase of 14.21% over the end of '22.
3. Good asset quality and stable provision coverage
The quality of assets is good. As of the end of 2023, the balance of non-performing loans was $30,760 million, or 1.33%, down 0.04 percent from the end of 2022. At the end of 23, the loan focus ratio was 1.42%, down 4BP from the previous year; the overdue loan ratio was 1.08%, which was the same as the previous year.
The provision coverage rate remains stable. By the end of 2023, the provision coverage rate was 303.87%, up 1.27 percentage points from the end of '22; the loan ratio was 4.11%, which was flat from month to month.
The capital adequacy ratio has remained stable overall. By the end of '23, the core level/tier 1/ capital adequacy ratios were 10.72%, 12.87%, and 17.4% respectively, down 0.43/0.50/0.06 percentage points from the end of '22, respectively, and the capital adequacy ratio declined.
Investment advice:
Currently, the overall valuation of major banks is still low. The Agricultural Bank's brand value is high, the county has deep roots, and the cost performance ratio is outstanding.
According to the agricultural bank's dividend ratio of 32% in '23, calculated from the closing price on March 29, the corresponding expected dividend rate for 24 is 5.72%. We gave the Agricultural Bank a target PB of 0.70 times, corresponding to a target price of 5.26 yuan, to maintain a “highly recommended” rating.
Risk warning: financial concessions; liquidity crisis for some housing enterprises; steady growth policies fall short of expectations, and economic recovery falls short of expectations.