Event: The company released its 2023 annual report.
Profit maintained steady growth: In 2023, the company achieved operating income of 66.711 billion yuan, an increase of 0.66% year on year; net profit attributable to shareholders of the parent company was 25.624 billion yuan, up 3.49% year on year, and ROE was 9.32%. Overall, the ROE remained steady.
There is strong momentum for the expansion of deposit and loan scale, and there is room for improvement in net interest spreads: in 2023, the company achieved net interest income of 50.350 billion yuan, a year-on-year decrease of 2.15%. Mainly affected by factors such as LPR cuts, loan repricing, and mortgage credit limit adjustments, the continued decline in loan yields put downward pressure on interest spreads.
In 2023, the company's net interest spread was 1.54%, down 22BP year on year, and the average yield on interest-bearing assets and loans was 4.19% and 3.68%, both down 17BP year on year. On the asset side, credit investment has been further strengthened, and the performance of public loans is impressive. The growth rate of retail loans is superior to that of peers. By the end of 2023, the total principal amount of loans and advances issued by the company was RMB 2.02 trillion, an increase of 12.14% over 2022. Among them, the company's total loan amount increased by 16.62% and the increase was 2.4 times that of 2022, focusing on key areas and key projects, and continuing to support related fields such as technology, green, inclusiveness, and “specialization, excellence and innovation”. The growth rate reached 33.1%, 41.62%, 34.5% and 187%, further strengthening its characteristic financial advantages. At the same time, the company's total personal loans increased by 9.80%, outperforming peers. The share of personal consumption and operating loan balances increased by 6.61 percentage points, and structural optimization led to an increase of 10 basis points in the average yield of individual loans over the same period last year. On the debt side, the degree of regularization of personal deposits is still increasing, and cost control is good. By the end of 2023, the company's total deposit principal amount was 2.07 trillion yuan, an increase of 8.18% over 2022. Among them, the size of savings deposits surpassed 615.733 billion yuan, an increase of 14.5% over 2022, but the cost of savings deposits decreased by 6BP. We believe there is room for improvement in net interest spreads as deposit interest rates are lowered and credit structures are optimized.
Non-interest income continues to grow, and the light capital transformation deepens: In 2023, the company achieved net non-interest income of 16.361 billion yuan, an increase of 10.41% over the previous year, accounting for 24.53% of operating income, an increase of 2.17 percentage points over the previous year. Among them, net revenue from handling fees and commissions was 3.752 billion yuan, a year-on-year decrease of 46.90%, mainly due to a year-on-year decrease in agency and commission fee revenue and an increase in online business fee expenses.
The company will deepen transformation and development, using light capital businesses such as wealth management, bank cards, escrow, and investment banking as important growth points to increase the share of non-interest income. By the end of 2023, retail AUM reached 1.04 trillion yuan, a year-on-year increase of 6.32%. Other non-interest income centered on return on investment was improved.
In 2023, the company's other non-interest revenue was $12.609 billion, 62.55% year-on-year. Among them, investment income was 11.365 billion yuan, an increase of 34.4% over the previous year.
Continuous optimization of asset quality: By the end of 2023, the company's non-performing loan ratio was 1.32%, down 0.11 percentage points from 2022, and the provision coverage rate was 216.78%, up 6.74 percentage points from 2022. Asset quality resilience continued to increase, the steady, moderate and positive trend was more obvious, and risk offsetting capacity was further improved.
Investment advice: The company is deeply involved in the Beijing region, insists on leading the five major transformations with digital transformation, and unleashed results. Inclusive, green, science, innovation, and cultural finance loans to public businesses are growing rapidly. Consumer loans and operating loans account for a high proportion of retail business. Comprehensive financial services for children have been upgraded, pension finance opportunities have been created, and revenue contributions have increased; the ability to obtain core deposits on the debt-side has increased, and cost pressure has been reduced. The retail aum has stabilized at more than a trillion dollars. The company continues to deepen transformation, expand its capital-light business space, and can be expected to develop in the future. Based on the company's fundamentals and stock price flexibility, we gave a “recommended” rating. The 2024-2026 BVPS was 12.73/13.73/14.8 yuan, corresponding to the current stock price PB0.45X/0.42X/0.39X.
Risk warning: Risk that macroeconomic recovery falls short of expectations, leading to deterioration in asset quality.