Introduction to this report:
Ping An Bank's 2024Q1 revenue growth rate was in line with expectations, profit growth slightly exceeded expectations, and asset quality remained stable.
The growth rate of scale is slowing down, retail is deepening transformation, and progress is being made towards public stability. Maintain the target price of $13.5 and maintain the holdings increase rating.
Key points of investment:
Investment advice: Adjust the 2024-2026 net profit growth forecast to 2.5%, 5.5%, and 8.2%, corresponding to EPS 2.31 (+0.03), 2.44 (-0.03), 2.65 (-0.08) yuan/share, and maintain the target price of 13.5 yuan, corresponding to 0.6 times PB in 2024, maintaining an increase rating.
The 24Q1 revenue growth rate was -14%, but the 2.3% year-on-year increase in net profit was more positive than expected. Apart from moderate release of provisions and 15% year-on-year reduction in loan credit losses, it was mainly due to improvements in the quality of non-credit assets and preparations for reimbursement due to impairment. On the revenue side, interest spreads were further squeezed by negative capital, falling 10 bps to 2.01% month-on-month. The combined scale growth rate slowed, and net interest income fell 21.7% year over year. The middle income side was affected by the banking premium rate reform. Agency insurance income was only 18.8% of the same period in 2023, which dragged down wealth management income by 54.3% and net handling fee income by 19.1%. Considering that the company is in a painful period of retail transformation and transformation, revenue may continue to be under pressure during the year.
Overall scale growth slowed. At the end of 24Q1, the growth rates of assets and loans were 2.5% and 2.2%, respectively, compared to the beginning of the year. The size of retail loans declined for three consecutive quarters. Q1 decreased by 5% from the beginning of the year, and structural adjustments continued to increase; public loans progressed steadily, and Q1 increased 12.8% from the beginning of the year.
Asset quality continued in 23Q4 and remained stable overall. At the end of 24Q1, the non-performing ratio of public and retail loans increased by 3 bps, 4 bps to 0.66% and 1.41%, respectively, from the beginning of the year, contributing half of the increase to public real estate non-performing loans. The retail side, mainly consumer loans, showed a significant increase in non-performing loans.
However, the 24Q1 bad generation rate decreased by 52 bps to 2.44% compared to 23Q4, and there are still sufficient provisions.
Risk warning: Risk exposure in specific areas exceeded expectations, and debt-side cost improvements were weaker than anticipated.