Core views:
The Bank of Beijing released its 2023 annual report. Our comments are as follows: Revenue, PPOP, and net profit to mother increased by 0.7%, -3.1%, and 3.5% year-on-year respectively. The growth rates changed by +3.87pct, +6.14pct, and -1.01pct respectively from 23Q1 to 3. Judging from cumulative performance drivers, scale expansion, provision accruals, and other income and expenditure are the main positive contributions, and factors such as net interest spreads, net handling fee revenue, and rising cost-to-revenue ratios are a drag.
Highlights: (1) The scale of assets is expanding steadily. The company's interest-bearing assets increased 11% year on year in '23, and the growth rate increased 0.63 pct year on year. Loans increased 12% year on year, and the growth rate increased 4.73 pct year on year. Among them, public loans increased 16.6% year on year, contributing to the main increase. The company continued to increase credit investment in the Yangtze River Delta region, and loans in the manufacturing, commercial service, construction, and zeroing industries all achieved a high growth rate; the retail side was dragged down by personal housing loans, and the growth rate declined. The company expanded consumer finance channels and strengthened its own online business, and non-residential consumer loans achieved a high increase. (2) Interest spread margins are stable.
The company's 23-year interest spread was 1.54%, the same as 23H1. On the asset side, yield on interest-bearing assets rebounded 1 bps in the second half of the year, and loan yields continued to decline. The return on interbank assets rose sharply in the second half of the year, effectively stabilizing the return on assets; on the debt side, the deposit activation rate declined markedly, and the deposit structure was adjusted. The deposit cost ratio was basically stable in the second half of the year, rising slightly by 1 bps. At the same time, active debt costs also rebounded. The overall debt-side cost ratio rose 2 bps from 23H1. (3) High growth in other non-interest rates. The company's other non-interest income increased 48.7% year over year in '23, and the main contribution came from the surplus of transactional financial assets.
Attention: (1) The deposit growth rate has declined. In '23, deposits increased 8% year on year, down 4.8 pct year on year. Demand deposits for the year shrank by 61.7 billion yuan. Personal current accounts and public demand deposits grew by 0.3% and -9.9%, respectively. (2) The retail defect rate is rising. The non-performing loan ratio in '23 was 1.32%, down 1 bps from the end of 23Q3. Among them, the estimated non-performing ratio for public loans at the end of 23 was 1.58%, down 15 bps from the end of 23Q2; the non-performing ratio for personal loans in '23 was 1.15%, up 15 bps from the end of 23Q2. The 23-year attention rate was 1.78%, up 28 bps from the end of 23Q2, or affected by the new financial asset risk classification regulations; the overdue rate was 1.72%, up 5 bps from the end of 23Q2; the provision coverage rate was 216.78%, up 1.55pct from the end of 23Q3. According to estimates, the company's new bad generation rate in '23 was 0.79%, an increase of 4 bps over the previous year. (3) Negative growth in revenue. Net revenue from handling fees and commissions increased by 31.6% year on year in '23, mainly due to a 55% year-on-year decrease in revenue from agency and contract business.
Profit forecast and investment advice: The net profit growth rate for 24/25 is expected to be 3.3%/4.1%, EPS is 1.22/1.27 yuan/share, respectively. The current stock price corresponds to the 24/25 PE is 4.66X/4.47X, respectively, and the corresponding 24/25 PB is 0.45X/0.42X, respectively. Taking into account the company's historical PB (LF) valuation center and fundamental improvements, the 24-year PB valuation was given at 0.52X, with a reasonable value of 6.59 yuan/share, maintaining a “buy” rating.
Risk warning: (1) economic growth has declined beyond expectations; (2) rising deposit costs have exceeded expectations; (3) international economic and financial risks have exceeded expectations; (4) policy regulation has exceeded expectations.