Incident: The Postbank released its 2023 annual report. The year-on-year revenue growth rate was +2.25% (the first three quarters of 23:1.24%), the year-on-year growth rate of profit before provision was -7.06% (the first three quarters of 23: -8.82%), and the net profit growth rate to mother was 1.23% (the first three quarters of 23:2.45%). The performance achieved steady growth. Our comments are as follows:
In the fourth quarter of 2023, Postbank's net profit growth rate was -6.68%. The driving factors were the expansion of the size of interest-bearing assets, the increase in net non-interest income and the decline in costs, which were hampered by narrowing interest spreads, increasing pressure on provision plans, and rising income tax ratios.
Volume: Assets maintained relatively rapid growth, retail loan investment accelerated
① Asset side: At the end of 2023, Postbank's total assets grew by 11.80%. The growth rate was 1.46pct lower than in the first three quarters of 2023. The increase was mainly due to credit investment. At the end of 2023, the total size of Postbank loans increased 13.02% year on year, and effective credit investment after excluding discounts reached 14.43% year on year.
The referendum campaign is growing strongly. In 2023, in the context of weak economic recovery, the Postbank continued to increase credit investment in advanced manufacturing, strategic emerging industries, specialization, innovation, inclusiveness, green, etc., and achieved a significant increase in public loans. At the end of 2023, Postbank's general corporate loan balance increased 20.42% year on year, down 1.40 pct from the first three quarters of 23; it added 545.1 billion yuan for the whole year, reaching a record high of an increase of 129.7 billion yuan over the same period last year.
Accelerate the launch of retail loans. At the end of 2023, Postbank's retail loan balance increased 10.48% year on year, up 0.89pct from the first three quarters of 23; the fourth quarter of 2023 increased by 67.1 billion yuan, an increase of 38.8 billion yuan over the previous year. From a structural point of view, the contribution of personal microfinance loans increased by 60.60%. In 2023, the Postbank established a differentiated competitive advantage in the rural market through general credit granting to farmers and hierarchical customer classification operations, etc., and achieved a year-on-year increase in the scale of personal microfinance by 22.64%, and the growth rate exceeded 20% for four consecutive years.
② Debt side: At the end of 2023, total Postbank deposits increased 9.76% year-on-year, and personal deposit growth formed the main support. At the end of 2023, personal deposit balances increased 10.75% year on year. Among them, deposit balances with a term of 1 year and below increased 11.13% year on year, and the personal deposit term structure continued to be optimized; the company's deposit balance increased 2.02% year on year.
Price: 23Q4 The decline in net interest spreads in a single quarter widened, and interest spreads continued to be pressured downward in yield. We estimate that Postbank's net interest spread for the 23Q4 single quarter was 1.90%, down 10 bps month-on-month and 22 bps year-on-year, which clearly dragged down the growth rate of net interest income. Looking specifically at the performance of interest rates on both negative sides of capital, ① yield on interest-bearing assets declined month-on-month. Affected by the reduction in LPR and the increase in the share of general corporate loans, we estimate that the yield on interest-bearing assets of the Postbank in the 23Q4 quarter was 3.43%, a decrease of 10 bps month-on-month, and an increase of 1 bps over the previous quarter. ② The cost ratio of interest-bearing debt remained flat month-on-month.
We estimated that Postbank's 23Q4 interest-bearing debt cost ratio was 1.57% in a single quarter, which was flat from month to month. It is expected to be mainly due to the Postbank's reduction in interest rates for personal deposits, which offsets the impact of deposit regularization.
Non-interest income increased year over year. The net non-interest revenue growth rate of the Postbank in the fourth quarter of 2023 was 25.89% year-on-year, up 49.27pct from the growth rate in the third quarter of 2023. It mainly benefited from increased bond yields. Specifically, in the fourth quarter of 2023, Postbank's other non-interest net income, mainly investment income, increased 55.42% year on year; net income from handling fees and commissions decreased 5.38% year on year. However, looking at the full year, the company's net revenue from handling fees and commissions decreased by 0.64% year on year. After excluding one-off factors in the transformation of net wealth management products, net revenue from fees and commissions increased by 12.05% year on year, and continued to grow rapidly.
The cost-to-revenue ratio declined year over year. Postbank's cost-revenue ratio for the fourth quarter of 2023 was 82.55%, a year-on-year decrease of 0.45pct, which provided some support for profit before provision. Specifically, in the fourth quarter of 2023, the increase in the size of individual customer deposits absorbed by postal agency outlets led to a 5.01% year-on-year increase in management expenses, but revenue growth was faster, lowering the cost-to-revenue ratio in a single quarter.
Asset quality is generally stable. At the end of 2023, the Postbank's bad rate and attention rate were 0.83% and 0.68% respectively, up 2 bps and 6 bps respectively from the first three quarters of 2023. From a structural point of view, the bad rate for public and retail sales both increased. At the end of 2023, the company's provision coverage rate fell 16.34pct month-on-month to 347.57%, and the risk compensation capacity was sufficient.
Investment advice: Looking ahead to 2024, Postbank interest spreads are still under pressure, and the cost-to-revenue ratio is likely to remain high. We expect the company's revenue growth rate to be -0.31% in 2024, and the net profit growth rate to be 0.29%. We give it a buy-A investment rating. The target price for 6 months is 5.98 yuan, which is equivalent to 0.7X PB in 2024.
Risk warning: Macroeconomic recovery fell short of expectations; retail transformation fell short of expectations; asset quality deteriorated significantly.