The 2023 results are largely in line with our expectations
Bank of Beijing announced 2023 results: 2023 revenue increased 0.7% year on year, net profit to mother increased 3.5% year on year; 4Q23 single quarter revenue increased 14% year on year, net profit to mother decreased 0.1% year on year; ROAE disclosed value 9.32%, down 0.28ppt year on year; performance was basically in line with our expectations. The company launched the “New Three New Battles” of digital transformation with “big retail - big operation - big technology” as the core, completed the optimization and adjustment of the retail and technology line organizational structures, and actively built “five characteristic banks”.
Development trends
The scale has maintained a relatively rapid growth rate. Total assets/loans/total deposits increased 10.6%/12.1%/8.2% in 2023, respectively. The company continues to promote retail transformation, accelerate the construction of a new retail strategy system based on customer experience and value creation, and support the growth of loan scale in related fields such as technology, green, inclusiveness, and “specialization and innovation”. The net increase in loans in 2023 was mainly due to personal consumer loans, manufacturing, leasing and business services; the Beijing/Jiangsu/Zhejiang regions accounted for 32%/22%/18% respectively.
Net interest spreads declined year over year. The average daily balance interest spread for the full year of 2023 fell 22bp to 1.54% year-on-year, the same as 1H23. Among them, the return on interest-bearing assets increased by 1 bps compared to 1H23, and the cost ratio of interest-paying debt increased by 2 bps compared to 1H23. The company optimized the retail credit structure and increased investment in personal consumer loans, driving personal loan yields to increase by 10 bps over the same period last year. We estimate that the average net interest spread at the beginning and end of the 4Q23 quarter fell 4 bps to 1.40% month-on-month, mainly due to a 5 bps month-on-month increase in the interest-bearing debt cost ratio.
4Q23 non-interest income increased 69.5% year over year, while other non-interest income grew from a low base. Net handling fee revenue for 4Q23 fell 70.1% year on year. We expect that revenue from agency and commission services decreased year on year; other non-interest income increased 230.4% year over year. Among them, investment income increased 52.4% from a low base in the same period last year, and profit and loss from changes in fair value increased by 1.1 billion yuan year on year due to declining interest rates in the bond market.
Increase the disposal of non-performing assets. The non-performing rate decreased by 1 bps to 1.32% at the end of 4Q23; the share of concerned loans increased 28 bps to 1.78% compared to the end of 2Q23; the share of overdue loans increased by 5 bps to 1.72% compared to the end of 2Q23; and credit costs rose 36 bps to 1.17% month-on-month. We estimate that the annual bad generation rate of 2H23 increased by 15 bps to 0.82% compared to 1H23, and that the annual bad generation rate increased by 4 bps to 0.79% year over year.
At the end of 4Q23, provision coverage increased 1.6ppt month-on-month to 216.8%.
Profit forecasting and valuation
Considering the company's speeding up disposal of non-performing assets, we lowered our 2024E/2025E profit forecast by 3.1%/5.3% to 26.3 billion yuan/27.4 billion yuan. The current stock price corresponds to 0.45 times the 2024E net market ratio and 0.42 times the 2025E net market ratio. Maintaining an industry rating and target price unchanged, corresponding to 0.47 times the 2024E net market ratio and 0.44 times the 2025E net market ratio, there is 5.3% upside compared to the current stock price.
risks
Other non-interest income was affected by the bond market and fluctuated beyond expectations, and the degree of risk exposure was higher than expected.