Everbright Bank released its 2023 annual report. Our comments are as follows: Revenue, PPOP, and net profit to mother changed by -3.9%, -4.4%, and -9.0% year-on-year, respectively. The growth rates changed by +0.38pct, +2.25pct, and -11.96pct, respectively, from 23Q1 to 3. Judging from the cumulative performance driver, factors such as growth in scale, other income and expenditure, and effective tax rate formation contributed positively, and factors such as narrowing net interest spreads, declining net handling fee revenue, and provision accruals to a certain extent.
Highlights: (1) Loan growth rebounded in 23Q4. Loans grew 6.0% year on year in 23, up from 23Q1-3. Public loans were the main support. Public loans grew 12.1% year on year in '23, up 1.68 pct from 23Q1-3. Leasing, business services, and manufacturing maintained high growth, with growth rates of 24.6% and 17.4%, respectively. Demand for retail loans is still weak, down 0.4% year on year in '23, mainly affected by weak real estate market and consumer demand. The company strengthened credit supply to small and micro customers, and operating loans increased 16.4% year on year. (2) Improvement of the malfunction rate. The company's non-performing loan ratio at the end of '23 was 1.25%, down 0.1 pct from the end of 23Q3. The non-performing ratio for public employees improved markedly, down 0.23pct from 23H1. Among them, the manufacturing non-performing rate decreased by 1.21pct compared to 23H1; the retail non-performing rate in '23 was 1.36%, up 18 bps from 23H1. Focus on the subsequent risk situation. The provision coverage rate in '23 was 181.27%, up 5.62 pct from the end of 23Q3; the attention rate was 1.84%, the same as at the end of 23H1; the overdue rate was 1.95%, down 0.01 pct year on year from the end of '22, which is relatively stable overall.
Attention: (1) 23Q4 large provision plan. The company's net profit growth rate in the 23Q4 quarter was -62%. The main drag was the company's large provision of 16.6 billion yuan in 23Q4, an increase of 9.9 billion yuan compared to 22Q4. It is expected to consolidate asset quality, meet the new financial asset risk classification regulations, and focus on subsequent risk exposure. (2) Interest spreads continue to narrow. The 23-year net interest spread was 1.74%, 8 bp/27 bps narrower than 23H1/22A. Among them, the yield on interest-bearing assets was 8 bps narrower than 23H1, mainly affected by factors such as repricing loan interest rates, declining interest rates on newly issued loans, and interest rate adjustments on stock housing loans; the interest-bearing debt cost ratio was 1 bps narrower than 23H1. Among them, the deposit cost ratio fell by 3 bps in the second half of the year, which is expected to mainly contribute to the reduction in deposit listed interest rates, but the trend of regularization continues, deposit costs are still rigid, and it is expected that the results of the reduction in deposit listed interest rates will continue to show results in '24.
Profit forecast and investment advice: The net profit growth rate of the company in 24/25 is expected to be -4.1%/0.6%, EPS is 0.58/0.58 yuan/share, respectively. The current stock price corresponds to the 24/25 PE of 5.8X/5.7X, respectively, and the corresponding 24/25 PB is 0.42X/0.40X, respectively. Taking into account the company's historical PB (LF) valuation center and fundamental conditions, maintain the company's reasonable value of 5.38 yuan per share, corresponding to the 24-year PB valuation ratio of about 0.7X, according to the current AH premium ratio, H The reasonable value of the shares is HK$4.11/share, all with a “buy” rating.
Risk warning: (1) the quality of retail assets deteriorated due to a decline in economic growth exceeding expectations; (2) deposit costs rose more than expected; (3) policy regulation exceeded expectations.