Key investment points: Bank of Qingdao's revenue increased 7.11% year on year, and net profit to mother increased 15.11% year on year. The company's net interest spread remained stable, credit costs declined marginally, and revenue increased year-on-year. We maintained the company's “superior to the market” rating.
Net interest spreads remained stable. The company continued to adjust its structure, and the average balance ratio of loans and investments increased; debt costs were strictly controlled, the cost ratio of interest-bearing debt decreased year-on-year, and the cost ratio of current and term deposits, and corporate and personal deposits all decreased compared to '22. Net interest spread for '23 was 1.83%, down 1bp from 23Q1-Q3.
Credit costs have declined marginally. The company's share of bad and concerned loans decreased by 9bps to 1.72% month-on-month compared to 23Q3, and the share of overdue loans decreased by 10bps to 1.42% compared to 23Q2. We estimated the bad generation rate of 0.50%, which is lower than in 22 years. The company's provision coverage rate decreased by 28.71 pct month-on-month to 225.96%.
Intermediary businesses such as financial management, wealth management, and transaction banking were vigorously expanded, and revenue increased 9.78% year over year. Fee revenue from financial management services increased 8.20% year over year. Handling fee revenue from entrustment and agency services increased 21.39% year on year, mainly due to an increase in agency insurance business fee revenue.
The customer base was strengthened, and consumer loans increased 29% year over year. The number of retail customers reached 8.944,600, an increase of 16.02% over the end of '22. Consumer loans are mainly internet loans within the province, and representative products include self-operated internet loans “Hairong Easy Loan”.
Investment advice. We forecast EPS to be 0.61, 0.67, 0.72 yuan in 2024-2026, and net profit growth rates of 13.81%, 9.36%, and 6.19%. We obtained a reasonable value of 4.81 yuan based on the DDM model; according to the PB-ROE model, the 2024E PB valuation was 0.70 times (0.60 times that of a comparable company), and the corresponding reasonable value was 4.24 yuan. Therefore, the reasonable value range is 4.24-4.81 yuan (corresponding to 2024 PE is 7.00-7.94 times, corresponding PE is 4.13 times that of the same company), maintaining the “superior to market” rating.
Risk warning: The solvency of enterprises has declined, asset quality has deteriorated dramatically; financial supervision policies have undergone major changes.