Incident: Bank of Changsha disclosed its 2023 annual report and 2024 quarterly report. The full year of 2023 and the first quarter of 2024 achieved revenue of 24.80 billion yuan and 6.56 billion yuan respectively, up 8.5% and 7.9% year-on-year respectively. Net profit to mother was 7.46 billion yuan and 2.09 billion yuan respectively, up 9.6% and 5.8% year-on-year respectively.
Performance: Interest spreads are resilient, and investment returns are outstanding.
23A's revenue growth rate was 8.5% year on year, which was basically the same as the previous three quarters. 24Q1 revenue growth rate was 7.9% year over year. The common pressure came from declining interest spreads, while increased income related to bond investment played a supporting role in revenue.
1) Net interest income: The year-on-year growth rate of 23A was 11.5%, down 3.1 pc from the previous three quarters, and the year-on-year growth rate of 3.9% in 24Q1. 23A net interest spread was 2.31%, down only 3 bps from 23H1. The decline was significantly better than that of peers, and interest spreads were more resilient.
A. Asset side: The yield on 23A interest-bearing assets was 4.63%, down 3 bps from 23H1, and the loan interest rate (5.76%) decreased by 2 bps. Among them, public loans and retail loans fell by 3 bps, 1 bps to 5.29%, and 6.52%, respectively. Retail loan interest rates declined slightly, or mainly due to the company increasing its investment in consumer loans with high yields. The share of consumer loans in personal loans at the end of 23Q4 continued to increase 1.6 pc to 36.6% compared to 23Q2.
B. Debt side: 23A The interest-bearing debt cost ratio was 2.20%, slightly higher than 23H1, and the deposit interest rate (2.02%) decreased by 2 bps. Among them, current deposits and time deposits increased by 1 bps and decreased by 6 bps respectively, mainly due to the company's continuous strengthening of pricing management and assessment guidance, continuously optimizing the term and structure of high-cost deposits, and leading the decline in interest rates on high-cost deposits.
2) Non-interest income: 23A's year-on-year growth rate was -2.6%, which was 8.4pc narrower than the decline in the previous three quarters. The 24Q1 year-on-year growth rate was 22.9%, of which:
A. Net revenue from handling fees and commissions: 23A's year-on-year growth rate was 16.1%, down 10.5pc from the previous three quarters. Looking at a single quarter, the year-on-year growth rates of 23Q4 and 24Q1 were -24.9% and -25.0% respectively. It is expected to be mainly affected by fee cuts in banking insurance channels, leading to a decline in agency business fee revenue.
B. Other non-interest income: 23A's year-on-year growth rate was -9.4%, 14.1 pc narrower than the decline in the previous three quarters. Looking at a single quarter, the year-on-year growth rates of 23Q4 and 24Q1 were 86.5% and 59.9% respectively, mainly due to the continued downward trend in interest rates in the bond market since 23Q4, which led to a year-on-year increase in income related to bond investment.
Asset quality: Overall, the provision for safety pads is still high.
1) The defect rate at the end of 24Q1 was 1.15%, the same as at the end of the previous year. The attention rate was 1.99%, up 17 bps from the end of the previous year. The provision coverage rate and loan ratio were 313.26% and 3.59%, respectively, down 1.0 pc and 1 bp from the end of the previous year, respectively.
2) 23 Credit impairment losses of 8.23 billion yuan were accrued for the full year, an increase of 770 million yuan over the previous year; of these, credit and non-credit categories accrued impairment losses of 7.64 billion yuan and 580 million yuan respectively, an increase of 91 billion yuan and a decrease of 140 million yuan compared with the same period last year. 23. The annual write-off was 4.93 billion yuan, an increase of 760 million yuan over the same period last year. The estimated defect generation rate after write-off was 1.22%, a slight increase of 5 bps compared to '22.
Assets and liabilities: Credit is gaining momentum, and consumer loans contribute mainly to the increase.
1) Second half of 23: At the end of December 23, the company's total assets exceeded 1 trillion yuan, reaching 1.02 trillion yuan, a year-on-year growth rate of 12.7%. The loan size was 488.4 billion yuan, a year-on-year growth rate of 14.6%. Credit investment throughout the year was strong. Q1-Q4 credit added net increases of 31.1 billion yuan, 20.6 billion yuan, 10.3 billion yuan, and 300 million yuan respectively. Q4 is expected to mainly prepare for credit reserves and a good start for the next year. Looking at the spin-off, there was a net increase of 10.6 billion yuan in loans in the second half of the year, including 9.3 billion yuan in public loans, mainly in manufacturing, real estate, and mining; retail loans increased 3.7 billion yuan, mainly in the consumer loan sector (net increase of 4.2 billion yuan), while operating loans decreased net by 900 million yuan, and bill pressure dropped by 2.4 billion yuan.
2) First quarter of '24:24Q1 assets grew by 11.2%, loans grew by 14.3%, and 24Q1 loans increased by 33.9 billion yuan, an increase of 2.8 billion yuan over the previous year. It is expected that credit investment will still be mainly in the infrastructure sector. 24Q1 deposits grew 11.9%, and 24Q1 deposits increased by 17.6 billion yuan.
Investment advice: As the largest commercial bank in Hunan Province, Bank of Changsha is rooted in the country. As the local region develops, it still has broad space for public, county, and retail businesses. It is expected that in a context where the scale remains high, interest spreads continue to be superior to peers, and wealth management supports middle income development, the revenue growth rate will continue to lead; it is expected to drive performance release after asset quality is further consolidated. It is expected to achieve a net profit of 80.02/87.15/9.525 billion in 2024-2026. Currently, 2024PB is about 0.46x, maintaining a “buy” rating.
Risk warning: macroeconomic downturn; consumption recovery falls short of expectations; declining asset quality drags down performance.