1Q24 profit was in line with our expectations, and revenue was slightly higher than our expectations
Societe Generale Bank's 1Q24 revenue increased 4.2% year on year, slightly exceeding our expectations, mainly due to the low decline in net interest spread and slightly exceeding expectations in net interest income; net profit to mother decreased by 3.1% year on year, in line with our expectations, mainly due to the company's adequate calculation reserves during the same period.
Development trends
Net interest spreads were resilient, deposit cost pressure dropped, and 1Q24 net interest income increased 5.1% year over year. Societe Generale Bank recorded a net interest spread of 1.87% in 1Q24, a decrease of only 2 bps compared to 4Q23 and a year-on-year decrease of 10 bps. The net interest spread was more resilient than the performance of peers. Looking at the breakdown, benefiting from the company's pressure reduction on high-cost deposits and fine debt-side management, the company's 1Q24 interest-paying debt cost decreased by 12 bps to 2.12% (average daily balance) over the same period last year, which is a core factor helping NIM stabilize. On the asset side, the company's total assets/loans increased by 1.0%/1.6% respectively in the first quarter compared to the beginning of the year. Credit investment was mainly concentrated in public sectors such as technology loans and green loans. The scale growth remained steady, and the ratio of loans to total assets increased 0.3 pct to 54.1% from the beginning of the year.
Other non-interest rates rose high against the backdrop of bullish debt. The 1Q24 company's non-interest revenue increased 2.7% year on year. Among them, net handling fee revenue decreased 19.0% year over year in a single quarter due to the integrated reform of insurance reporting, etc.; other non-interest income increased 16.2% year on year. We think it mainly benefited from the good performance of the bond market in the first quarter and the company's effective grasp of phased bond market trading opportunities.
The accrued impairment was sufficient, and the provision coverage rate remained stable. The company accrued impairment losses of 161 billion yuan in 1Q24, an increase of 46% year over year, and credit costs increased by 30 bps to 1.17% year over year. We believe that due to careful consideration of potential future risks, the company accrued impairment losses in the current period. By the end of 1Q24, the company's loan non-performing ratio was 1.07% month-on-month compared to the beginning of the year, and the attention rate increased by 15 bps to 1.70% from the beginning of the year due to factors such as macroeconomic structural transformation and real estate market adjustments. In terms of bad generation, we estimate that the net bad generation rate in 1Q24 was 1.06%, an increase of 17 bps over the previous year, but a decrease of 29 bps compared to the full year of 2023; among them, the number of new cases of bad credit cards on the retail side declined year on year. The company's loan provision coverage rate remained stable, up 0.3 pct to 245.5% from the beginning of the year.
Profit forecasting and valuation
We keep our profit forecast unchanged. The company currently trades at 0.4x/0.4x 2024E/2025E P/B. We keep the company's target price of 19.74 yuan unchanged, corresponding to 0.5x/0.5x 2024E/2025E P/B and 22.1% growth space. Maintain an outperforming industry rating.
risks
Real estate risk exposure exceeded expectations, and macroeconomic recovery fell short of expectations.