Introduction to this report:
CCB's revenue and net profit growth rate in 2023 was in line with expectations. Profits maintained positive growth, asset structure improved, debt cost performance was superior to peers, asset quality was stable, moderate and positive, and maintained an increase rating.
Key points of investment:
Investment advice: Taking into account the 2023 financial report and 2024 credit volume and price trend forecast, China Construction Bank's 2024-2026 net profit growth forecast is 0.23%/2.92%/4.56%, corresponding to EPS1.33 (-0.13) /1.37 (-0.29) /1.44 (new) yuan. Maintain the target price of 7.96 yuan, corresponding to 0.63 times PB in 2024, and maintain an increase in holdings rating.
Profit growth is relatively stable, and the asset structure is optimized. Revenue and net profit growth rates in 2023 were -1.8% and 2.4% respectively, down 0.5pc and 0.7pc respectively from the previous three quarters, mainly driven by interest spreads. The share of loans and notes in assets increased by 1 pc and decreased by 0.3 pc, respectively, compared to 2022.
Net interest spreads are under pressure, and the performance of the debt side is superior to peers. Net interest spreads in 2023 were 31 bps narrower than in 2022 to 1.70%, and are still leading in the industry. The decline in yield on interest-bearing assets compared to the first half of the year was greater than that of peers. The main reason was that mortgages accounted for a relatively high share of assets. The cost ratio of interest-bearing debt rose slightly by 2 bps compared to the first half of the year. Among them, the deposit cost ratio remained flat, and the increase in debt costs was less than that of peers.
Asset quality is stable, moderate and improving. The defect rate was 1.37%, the same as Q3. The attention rate and overdue rate decreased by 6 bps and 1 bp, respectively, from the end of June. The bad generation rate fell by about 4 bps from the first half of 2023, and the provision coverage rate decreased by 3.5 pc to 239.8% compared to Q3. Impairment losses in 2023 decreased by 17.78 billion yuan compared to 2022, mainly financial investment and off-balance sheet asset contributions, while loan impairment losses increased by 4.941 billion yuan compared to 2022, maintaining a prudent and strict impairment accounting policy.
Risk Warning: Demand recovery fell short of expectations; retail loan risk exposure exceeded expectations.