Ping An Bank's 1Q24 revenue was -14.0% year-on-year, mainly driven by interest income; net interest income was -21.7% YoY (-9.3% YoY in 2023). The slowdown in growth was also affected by a combination of narrowing interest spreads and slowing credit growth. Net non-interest income was +4.9% year-on-year. Affected by capital market fluctuations and bank premium rate cuts, there was a significant negative increase in handling fees. Against the backdrop of declining interest rates in the capital market, other non-interest growth rates were high, driving non-interest income to achieve positive growth. Provision was released, net profit remained stable, +2.3% year over year.
Net interest income for the single quarter was -5.6% month-on-month, and the annualized net interest spread for the single quarter decreased by 10bps to 2.01% month-on-month. Asset-side returns declined 9 bps month-on-month, and debt-side costs rose 2 bps month-on-month. Asset side: The yield on interest-bearing assets fell 9 bps to 4.25% month-on-month. Our estimates are mainly due to a decline in interest rate factors. Interest rates on public loans and personal loans declined 10 bp/6 bps month-on-month to 3.79% and 6.04%, respectively. Debt side: The interest rate on interest-bearing debt increased by 2 bps to 2.3% month-on-month, hampered by structural factors and interest rate factors. Interest rates on deposits increased by 3 bps to 2.22%, with interest rates on public deposits rising by 3 bps to 2.15%, and interest rates on personal deposits falling by 1 bps to 2.33%. Structural dimensions: The share of deposits in interest-bearing liabilities decreased by 2.1 points to 68.9%.
Growth rate and structure of assets and liabilities: The restructuring continues, and new loans are mainly supported by the public. Total asset accumulation increased 5.0% year on year, total loan accumulation increased 1.2% year on year, and total loan growth rate was lower than total asset growth rate. Total debt increased 4.7% year on year, total deposit increased 1.7% year on year, and total deposit growth rate was lower than total debt growth rate.
Net non-interest income: Fees continue to be under pressure, and low interest rates drive significant growth in other non-interest rates. Net non-interest income increased 4.9% year over year (VS 2023 -6.1% year over year), net handling fee revenue -19.1% year over year (VS 2023 -2.6% year over year), and net other non-interest income increased 56.7% year over year (VS 2023 -11.7% year over year).
Asset quality: The non-performing rate and share of concern categories have increased, and overdue dates have been stable. Bad generation was 2.20%, down 0.65% month-on-month. In the first quarter, write-off efforts declined, and the non-performing rate increased by 1 bp to 1.07% month-on-month. The share of followers was 1.77%, up 2 bps from month to month. The overdue rate was 1.42%, unchanged from month to month. The provision coverage rate was 261.66%, down 15.97 percentage points from the previous month. The loan ratio was 2.79%, down 0.15 points from the previous month.
Investment advice: Company 2024E, 2025E, 2026E PB 0.47X/0.44X/0.41X. The company practiced internal skills during the economic downturn, adjusted its customer base, and reduced risk appetite. Furthermore, the company relies on Group technology and comprehensive finance, and has obvious advantages in expanding public and retail businesses. In the medium to long term, it is expected to transform into a high-quality bank. Investors are advised to actively monitor the intensity of its transformation.
Note: According to the 2024 quarterly report, we fine-tuned our earnings forecast and expect net profit to be 47.5 billion, 48.7 billion, and 49.9 billion dollars for 2024-2026 (previous values were 47.7 billion, 48.8 billion, and 50 billion dollars).
Risk warning: economic downturn exceeds expectations, company operations fall short of expectations