Incident: Chongqing Agricultural Commercial Bank released its 2024 quarterly report. The first quarter of 2024 achieved revenue of 7.13 billion yuan, a year-on-year decrease of 2.9%, and net profit to mother of 3.52 billion yuan, a year-on-year decrease of 10.8%.
Performance: Profit before provision grew 5.4% year on year, cost pressure drop was clearly 24Q1 revenue growth rate of -2.9% year on year, profit before provision was +5.4% year on year, net profit to mother grew -10.8% year on year, and 24Q1 credit impairment loss was 1.33 billion yuan, an increase of 1.2 billion yuan over the same period last year, mainly due to the large amount of bad asset disposal and recovery in 23Q1 (1.37 billion yuan), which made the comparative base of credit impairment losses lower, while the net profit comparison base was higher. Looking at the whole year, as the subsequent collection of non-performing assets continues to increase, the repayment amount is expected to remain stable throughout the year, and the profit growth rate is expected to pick up quarterly.
1) Net interest income: The year-on-year growth rate in 24Q1 was -9.2%, down 3.1 pc from the same period last year, mainly due to downward pressure on interest spreads and a slowdown in credit investment growth. The 24Q1 net interest spread was 1.64%, down 18 bps year on year and 9 bps month on month. It is expected mainly due to the repricing of loans at the beginning of the year and the downward impact of interest rates on newly issued loans.
2) Other interest income: 24Q1 grew at a year-on-year rate of +27.5%, with net income from handling fees and commissions +0.2% year-on-year, and other non-interest income +46.7% year-on-year, mainly due to declining interest rates in the 24Q1 bond market, which increased investment income of 1.09 billion yuan. 24Q1 achieved other non-interest income of 1.09 billion yuan, of which investment income was 940 million yuan, an increase of 102.2% year over year.
3) Cost-to-revenue ratio: The 24Q1 cost-revenue ratio was 27.21%, down 5.8pc year on year, mainly due to the company actively optimizing resource allocation and taking more measures to reduce costs and increase efficiency. Thanks to cost pressure reduction, the company's profit growth rate before provision reached +5.4% year on year, up 16.5pc from the same period last year.
Asset quality: The overall stability is stable, and the asset safety margin is high
The non-performing rate at the end of 24Q1 was 1.19%, the same as at the end of the previous year. The non-performing balance increased by 210 million yuan to 8.27 billion yuan from the end of the previous year, which is expected to be mainly due to fluctuations in the quality of retail assets. The provision coverage rate and loan ratio were 367.54% and 4.36% respectively, up 0.84pc from the end of the previous year, respectively, and remained basically the same.
Assets and liabilities: to the public sector is the main driver of credit growth
1) Asset side: The year-on-year growth rate of 24Q1 assets was +4.1%, and the year-on-year growth rate of loans was +4.9% (4.5 pc slower than the same period last year). The increase in 24Q1 loans was 20.3 billion yuan. Among them, public loans, retail loans, and notes increased by 15.6 billion yuan, 3.9 billion yuan, and 800 million yuan respectively, and the contribution of public loans to credit growth increased by 7.1 pc to 77.0% year on year.
2) Debt side: The year-on-year growth rate of 24Q1 deposits was +5.9%, and 24Q1 deposits increased by 55.4 billion yuan, of which personal deposits increased by 61.1 billion yuan. As of the end of the year, the share of personal deposits in total deposits continued to increase by 1.6 pc to 84.9% compared to the end of the previous year.
Investment advice: The Chongqing Agricultural Commercial Bank is expected to benefit from the construction of the Chengdu-Chongqing Shuangcheng Economic Zone, continue to maintain continuous improvement in fundamentals under factors such as accelerated loan growth, comparative advantages in interest spreads, and improved asset quality to release profits, and have a cost-effective advantage among high-dividend banks. The Chongqing Agricultural Commercial Bank is expected to achieve net profit of 114.11/119.52/12.596 billion yuan in 2024-2026, maintaining the previous “buy” rating.
Risk warning: macroeconomic downturn; consumption recovery falls short of expectations; construction of the Chengdu-Chongqing Shuangcheng Economic Zone falls short of expectations.