Annual report review: The decline in revenue narrowed, and the net profit growth rate increased to 1.3%. Credit investment was weak in the fourth quarter of 2023, and the year-on-year decline in revenue growth was 2 percentage points narrower than in the third quarter; the overall quality of the company's assets was stable, the increase in the non-performing rate slowed, and the overdue rate dropped sharply. Under prudential considerations, the increase in reserve planning was increased. Net profit achieved a 1.3% year-on-year increase, and the growth rate increased 0.6 percentage points from the third quarter.

Net interest income: Q4 net interest income -10.9% month-on-month, mainly driven by interest spreads. The annualized interest spread for a single quarter was 1.32%, down 20 bps from month to month. Mainly, interest rates on the asset side fell significantly, and there was also some drag on the debt side. The asset-side yield declined 18 bps from month to month. Structurally, the share of loans in the fourth quarter fell 0.5 percentage points from the third quarter, and debt conversion is also expected to have a certain impact on yield. The debt-side interest rate rose 3 bps month-on-month. It is expected to be mainly due to structural reasons. On the one hand, the share of deposits fell 0.4 percentage points from the third quarter, and on the other hand, the share of time deposits also increased further.

Asset and liability growth rate and structure: Credit investment was weak in the fourth quarter, mainly for public loans. The pressure drop in Internet cooperative consumer loans basically ended, and residents' deposits grew well. 1) Credit: The Bank of Chongqing added 39.65 billion dollars in credit throughout the year, an increase of 14.6% over last year, and 6.61 billion yuan in quarterly loans in the fourth quarter, of which 6.55 billion dollars were invested in public loans in a single quarter, which was the main new force. The scale of notes also continued to shrink, and the credit structure continued to improve. On the retail side, the pressure drop in Internet cooperative consumer loans in the second half of the year basically came to an end. The share of retail credit in new loans increased 2.8 percentage points to 1.1% compared to the middle of the year. 2) Deposits: The Bank of Chongqing added 29.15 billion new deposits throughout the year, an increase of 30.5% less than last year. Among them, Q4 added 5.49 billion dollars in a single quarter, accounting for a decrease of 0.4 percentage points to 59.2% compared to the third quarter.

Asset quality: The rise in the non-performing rate has slowed down, and the overdue rate has dropped sharply. 1. Defect dimension - the defect rate is basically stable month-on-month. Q4 Bank of Chongqing's non-performing rate was 1.34%, up 1 bps from the third quarter, and the rate of increase was slower than in the third quarter. The cumulative annualized net generation rate of bad growth increased by 11 bps to 0.56% in the fourth quarter. In terms of future negative pressure, concerned loans accounted for 3.36%, down 9 bps from the first half of the year. 2. Overdue dimension - the overdue rate has dropped sharply. The overdue rate fell 62 bps to 1.95% from mid-year, and continued to decline steadily. 3. Provision dimension - Provision is further improved. The provision coverage rate increased 7.5 percentage points month-on-month to 232.90%; loan coverage increased by 11 bp to 3.11% month-on-month, and risk offsetting further increased.

Investment suggestions: The company's 2024E, 2025E, 2026E PB 0.48X/0.45X/0.41X; PE5.11X/4.97X/4.87X. The company's layout is in the southwest area with the Chengdu and Chongqing Shuangcheng Economic Zone as the core. The public side is the company's traditional strength, and the loan growth rate is high. Asset quality is improving as Chongqing's economy recovers. The first coverage gave an “gain” rating, and it is recommended to maintain active attention.

Risk warning: The economic downturn exceeded expectations, the company's operations fell short of expectations, and research information was not updated in a timely manner.