The marginal recovery in revenue growth was mainly due to an improvement in net other non-interest income. As of the end of '23, the cumulative year-on-year growth rates of Bank of Ningbo's revenue, PPOP, and net profit to mother were 0.9 pct, 1.9 pct, and -1.9 pct, respectively, compared to 23Q3.
Looking at the breakdown, the growth rate of net interest income continued to decline as interest spreads narrowed, down 1.9 pct from 23Q3; net fee revenue growth fell sharply by 26.3 pcts compared to 23Q3 due to capital market fluctuations, integrated insurance reporting, and reduction in public offering fees; the bond market performed well in the fourth quarter, and the growth rate of net other non-interest income rebounded by 21.4 pcts.
Consumer loans are growing strongly, and credit investment is actively supporting table expansion. By the end of '23, the year-on-year growth rate of loans had rebounded 3.4 pct to 19.8% from 23Q3, driving the year-on-year growth rate of interest-bearing assets rebounded 2.1 pct to 14.8% year over year. Among them, the year-on-year growth rate of personal loans bucked the trend and increased 2.8 pcts compared to 23Q3. Mainly, the growth rate of consumer loans increased by 9.5 pct. Ningyin Consumer Finance has become a strong growth pole. In the second half of '23, Ningyin Consumer Finance's assets increased sharply by 30.82 billion yuan to 45.67 billion yuan, achieving net profit of 110 million yuan, and the growth momentum is strong.
The downward trend in interest spreads stabilized marginally. By the end of '23, net interest spread was down 1bp to 1.88% from 23Q3. On the asset side, the yield on interest-bearing assets decreased by only 1 bps compared to 23H1, and the yield on loans fell by 5 bps. Looking at the split, the yield on public loans remained flat at 23H1, and the yield on personal loans fell by 19 bps. On the debt side, the interest-bearing debt cost ratio increased by 6 bps compared to 23h1, mainly due to the increase in deposit cost ratios. The trend of deposit periodization continues.
Asset quality remains excellent, and provision coverage has declined. By the end of '23, the non-performing rate was 0.76%, flat at 23Q3. The non-performing ratio for public and retail loans changed by -11bp and 2bp, respectively, compared to 23H1, and the overall risk was manageable. The estimated net generation rate and attention rate increased by 6 bp and 11 bp, respectively, compared to 23Q3, and the overdue rate increased by 11 bps compared to 23H1.
Compared to 23Q3, the estimated credit cost ratio increased by 6 bps to 0.78%, and the provision coverage rate decreased by 19.5 pcts to 461.0%, but there is still sufficient profit margin for backfeeding.
Considering this year's special credit demand and pricing environment, we lowered core assumptions such as interest spreads and mid-income growth, and forecast the year-on-year growth rate of the company's net profit for 24/25/26 to be 9.6%/8.9%/9.1%, EPS is 4.12/4.50/4.92 yuan, and BVPS is 30.34/34.28/38.59 yuan (the original forecast value for 24/25 is 30.61/35.30 yuan). The current stock price corresponds to the 24/25/26 PB of 0.70X/0.55X. Using the historical valuation method, referring to the PB (FY1) core in the past three years, a 35% discount was given at 1.33 times, corresponding to 0.90 times PB in 24 years. The target price was 27.30 yuan/share, maintaining the “buy” rating.
Risk warning
Economic recovery fell short of expectations; demand for credit fell short of expectations; asset quality deteriorated.