Core views:
Zijin Bank released its 2023 annual report and the report for the first quarter of 2024. Revenue, PPOP, and profit to mother grew by -1.9%, -1.5%, and 1.2%, respectively; 24Q1 revenue, PPOP, and net profit to mother increased 9.8%, 12.0%, and 5.4% year-on-year, respectively. Judging from the cumulative performance drivers for 23 years, the expansion of scale, net handling fee revenue, cost to revenue ratio, and reduction in provisions made a positive contribution. Factors such as the narrowing of net interest spreads, other income and expenditure, and effective tax rates contributed to a certain extent. Other income and expenditure and effective tax rates contributed back in 2024Q1, and fees and provision contributions turned negative.
Highlights: (1) Steady scale expansion. On the asset side, the year-on-year growth rate of 23/24Q1 loans was 10.6%/9.8%, respectively, and remained high. Structurally, it was mainly for the princess. The size of public loans increased 16.3%/10.4% year on year 23, and the leasing and business services industry, construction industry, and infrastructure provided major increases of 30.9%, 13.6%, and 10.4% year on year, respectively. Personal loans are slowing down due to weak mortgage growth and new credit card regulations. (2) High increase in non-interest income. The company's revenue increased 74.4% year-on-year in mid-year, thanks to increased handling fees for agency business and payment and settlement services, but the increase in agency fee revenue was mainly in the first half of the year, and the second half may be affected by fee cuts in banking insurance channels, and the year-on-year increase declined significantly; other non-interest income in 24Q1 reached 240.2% year-on-year, mainly due to increased bond disposal income and a sharp increase in 24Q1 investment income. (3) It is proposed to implement mid-term dividends. The board of directors of the company has decided to pass the 2024 mid-term dividend arrangement. It is planned to combine undistributed profits with current results to distribute dividends in mid-2024.
Concern: (1) Interest spreads continued to fall, and the 24Q1 decline narrowed year-on-year. Net interest spreads for '23 and 24Q1 were 1.59%/1.53%, respectively. Net interest spreads narrowed mainly in 23Q1 and 23Q2, and remained stable in the second half of the year. 24Q1 was affected by factors such as loan repricing. Interest spreads continued to narrow by 6 bps compared to '23, but the decline narrowed sharply compared to 23Q1. According to our estimates, the 24Q1 interest-bearing debt cost ratio declined markedly. The company actively optimized the debt structure and continued to show results.
(2) Increased attention rate and overdue rate. At the end of '23/24Q1, the defect rate was 1.16%, which remained stable. It was estimated that the new generation rate of defects in 24Q1 was 0.37%, a year-on-year decrease of 14 bps, and the overall number of new defects was manageable. The 23-year attention rate and overdue rate were 0.96% and 1.29%, respectively, up 7 bps from the end of 23H1, and a further 23 bps increase in the 24Q1 attention rate, focusing on subsequent risk exposure. The provision coverage rate at the end of 24Q1 was 252.73%, up 5.48 pcts from the end of '23, and the provision safety pads were consolidated.
Profit forecast and investment advice: The net profit growth rate of the company in 24/25 is expected to be 3.05%/3.93%, EPS is 0.46/0.47 yuan/share, respectively. The current stock price corresponds to the 24/25 PE of 5.75X/5.53X, respectively, and the corresponding 24/25 PB is 0.49X/0.46X, respectively. Taking into account the company's historical PB (LF) valuation center and fundamentals, the company maintains a reasonable value of 3.97 yuan per share, corresponding to the 24-year PB valuation of about 0.7X, maintaining the “increase” rating.
Risk warning: (1) Macroeconomics declined more than expected, and asset quality deteriorated sharply. (2) Consumption recovery fell short of expectations, and deposit regularization was serious. (3) Market interest rates are rising, and transaction books are at a loss.