1Q24 results are in line with our expectations
Ping An Bank announced 1Q24 results. The company's revenue for the first quarter decreased by 14.0% year on year, profit before provision decreased by 14.9% year on year, and net profit to mother increased 2.3% year on year. The results were in line with our expectations. Based on factors such as the growth rate of comprehensive reporting, customer style adjustments, and organizational structure adjustments, we believe that Ping An Bank is actively making adjustments to deal with external constraints such as the economy and industry, and is in a period of medium- to long-term competitiveness construction.
Development trends
The company's total assets/loans/deposits in 1Q24 increased 2.5%/2.2%/1.3%, respectively, and the year-on-year growth rate was 5.0%/1.2%/-0.5%. The company reduced the pace of table expansion, adjusted its organizational structure, and abandoned the demand for scale to an organic combination of quantity, quality and price. Among them, the net increase in loans in the first quarter was mainly due to the increase in loans to public loans. Retail loans are in the process of structural optimization, overall risk appetite has improved markedly, and marginally safer assets are being sought. Currently, retail mortgage loans account for 60%.
Net interest spreads narrowed and decreased month-on-month, actively reducing customer bias. The company's 1Q24 NIM decreased by 10bp to 2.01% month-on-month, and the single-quarter net interest spread decline narrowed by 9 bps month-on-month, and decreased by 62 bps year-on-year. Among them, it was affected by multiple factors such as heavy pricing and loan bias adjustments. The company's Q1 loan yield decreased by 14 bps to 4.94% month-on-month, the yield on interest-bearing assets decreased by 9 bps to 4.25%, and both retail/public loan earnings narrowed month-on-month; debt-side deposit pricing was still somewhat rigid, and the Q1 deposit and interest-paying debt cost ratios increased by 3 bp/2 bps to 2.22%/2.30%, respectively. The company's 1Q24 net interest income decreased 21.7% year over year.
Other non-interest income increased 4.9% year over year in 1Q24, mainly due to the contribution of other non-interest income in the context of strong debt.
The 1Q24 company's net handling fee revenue fell 19.1% year on year, mainly due to the year-on-year decrease in wealth income (down 54.3% year over year). Among them, insurance agent income was affected by the integrated reporting and bank reform at a high base. The other non-interest side benefits from bond market performance and structural opportunities, and has performed well in terms of investment income and other non-interest rates.
Asset quality remains stable. As of the end of 1Q24, the company's loan default rate and attention rate were 1.07% and 1.77% respectively, up 1 bp and 2 bps month-on-month respectively, and the overdue rate remained flat at 1.42% month-on-month; we expect that the new defects mainly come from the retail business side. The provision coverage rate decreased by 15.9 pct to 261.7% month-on-month, which played a countercyclical role.
How to look forward to future dividends? The company's dividend rate increased from 12% to 30% in 2023, which attracted market attention. We believe that in the short term, benefiting from the slowdown in the company's RWA growth rate and refined capital management, there is some room for high dividends; sustainability in the medium term requires attention to the ability to replenish endogenous capital after table expansion and acceleration.
Profit forecasting and valuation
We keep our profit forecast unchanged. The company is currently trading at 0.5x/0.4x 2024E/2025E P/B, and our target price of 13.18 yuan remains unchanged, corresponding to 0.6x/0.5x 2024E/2025E P/B and 23.3% growth space. Maintain an outperforming industry rating.
risks
Macroeconomic recovery fell short of expectations, capital markets continued to weaken, and downward pressure on net interest spreads exceeded expectations.