Revenue and net profit achieved positive growth. The company achieved operating income of 26.4 billion yuan and 7.1 billion yuan in the first quarter of 2023 and 2024, up 3.1% and 3.7% year on year, respectively; net profit to mother was 12.1 billion yuan and 3.6 billion yuan respectively, up 10.6% and 1.5% year on year. The company's weighted ROE in 2023 was 11.3%, up 0.1 percentage points year over year. Judging from the attribution of performance growth, the main driving factors were that the decline in net interest spreads dragged down revenue growth, the 2023 annual report provided to feed back profits, and the high accrual of asset impairment losses in the first quarter of 2024 put pressure on profit growth.
Steady growth in assets. The company's total assets increased 8.6% and 9.1% year-on-year in the first quarter of 2023 and 2024, with total assets of 1.44 trillion yuan at the end of the first quarter of 2024, maintaining a relatively steady growth rate. Among them, deposits increased by 7.9% and 6.2%, respectively. The growth rate of deposits declined in the first quarter of this year, mainly due to a decrease in public deposits; loans increased 6.1% and 6.1% year over year, maintaining a relatively stable growth rate. The company's core Tier 1 capital adequacy ratio at the end of the first quarter was 14.49%, and the dividend rate remained at 30% in 2023.
Net interest spreads decreased year over year, and the debt advantage is still obvious. The average daily net interest spread disclosed by the company in 2023 was 1.67%, a year-on-year decrease of 16 bps, mainly affected by the decline in yield on interest-bearing assets. On the asset side, due to factors such as the decline in LPR, loan yields fell 29 bps year on year, and yield on interest-bearing assets fell 18 bps year over year; on the debt side, deposit costs fell 6 bps year on year, and interest rate on interest-bearing debt fell 4 bps year on year, continuing to show debt advantage.
Asset quality has fluctuated. Our estimated bad generation rate in 2023 increased 0.24 percentage points year over year to 0.56%. The non-performing rate increased slightly. It was 0.99% at the end of the first quarter of 2024, up 2 bps from the beginning of the year, and 5 bps from the beginning of 2023, mainly an increase in the non-performing rate for personal loans; 1.27% at the end of the 2024 quarter, up 4 bps from the beginning of the year, and 53 bps from the beginning of 2023, mainly due to the impact of the latest regulations on restructuring assets and concerned loans in the “Commercial Bank Financial Asset Risk Classification Measures”.
The company's provision coverage rate at the end of the first quarter of 2024 was 382%, down 23 percentage points from the beginning of the year and 63 percentage points from the beginning of 2023.
Investment suggestions: Taking into account changes in the company's asset quality, we adjust the profit forecast downward and push the profit forecast forward by one year. We expect the company's 2024-2025 net profit of 126/13.5 billion yuan (previous forecast value of 142/15.3 billion yuan), net profit to mother in 2026 of 145 billion yuan, with a year-on-year growth rate of 4.1% /7.1/ 7.2%%; diluted EPS is 1.31/1.40/1.50 yuan; PE corresponding to the current stock price is 5.4/5.0/4.7x, and PB is 0.6/0.5/0.5x, and maintained “Accumulation” rating.
Risk warning: The weakening macroeconomic situation may adversely affect the quality of bank assets.