The decline in net interest spreads dragged down revenue growth. The company achieved operating income of 38.8 billion yuan in the first quarter of 2024, a year-on-year decrease of 14.0%, an increase of 5.6 percentage points over the previous annual report; net profit to mother for the first quarter was 14.9 billion yuan, an increase of 2.3% over the previous year, and the growth rate was basically the same as the previous year's annual report. Judging from performance attributions, the main reason is that the decline in net interest spreads dragged down revenue growth, and the decrease in asset impairment losses over the same period last year supported net profit.
The size of assets has grown steadily. Total assets increased 5.0% year-on-year to 5.73 trillion yuan at the end of the first quarter of 2024, up 2.5% from the end of the previous year, and the asset growth rate remained stable. Of this, the total loan amount was 3.48 trillion yuan, up 2.2% from the end of the previous year, and the deposit balance was 3.45 trillion yuan, up 1.3% from the end of the previous year. The company's core Tier 1 capital adequacy ratio at the end of the first quarter was 9.59%, up 0.37 percentage points from the beginning of the year.
Net interest spreads continued to fall. The company disclosed an average daily net interest spread of 2.01% for the first quarter, a year-on-year decrease of 62 bps, and a decrease of 10 bps over the fourth quarter of last year. The decline in net interest spreads was affected by various factors, including lower loan interest rates due to LPR cuts, lower loan yields due to corporate asset restructuring, expansion of medium- and low-risk customer groups, pressure drop on high-yield retail loans, etc., as well as factors such as increasing credit support in key areas to benefit the real economy. In contrast, deposit costs are relatively rigid due to continued high interest rates in the foreign currency market and the regularization of RMB deposits.
Net revenue from processing fees declined, and AUM increased. Net revenue from handling fees fell 19.1% year on year in the first quarter of 2024, mainly due to reduced fees from banking insurance channels and a decline in equity fund sales, etc., and wealth management revenue declined significantly year on year. The company's AUM was 4.08 trillion yuan at the end of the first quarter, up 8.2% year on year, up 1.3% from the end of the previous year.
Increase bad treatment. The company's defect rate at the end of the first quarter was 1.07%, up 1 bp from the beginning of the year; the attention rate was 1.77%, up 2 bps from the beginning of the year; the provision coverage rate was 262%, down 16 percentage points from the beginning of the year. The company's bad generation rate in the first quarter was 2.24%, up 18 bps year on year. The company stepped up its efforts to dispose of non-performing assets and wrote off loans of 17.7 billion yuan in the first quarter, an increase of 12.1% over the previous year.
Investment advice: We slightly lowered our profit forecast based on the quarterly report to reflect the impact of the decline in net interest spreads. We expect the company's net profit for 2024-2026 to be 470/484/51.8 billion yuan (the previous forecast value was 472/503/555 billion yuan), with a year-on-year growth rate of 1.1%/3.0%/7.0%; diluted EPS was 2.23/2.30/2.47 yuan; PE corresponding to the current stock price is 4.8/4.7/4.3x, and PB is 0.48/0.45/0.42x, maintaining the “increase” rating.
Risk warning: The weakening macroeconomic situation may adversely affect the quality of bank assets.