Performance growth is steady. The company achieved operating income of 67.1 billion yuan in the first quarter of 2024, which was basically the same as the previous year, and the growth rate remained stable; in the first quarter, it achieved net profit of 25 billion yuan, an increase of 1.4% over the previous year, and the growth rate did not change much from the previous year's annual report. Judging from performance attributions, the slowdown in the company's asset expansion is dragging down revenue growth, but the narrowing in net interest spreads reduced the drag on revenue growth, and the year-on-year decrease in asset impairment losses supported net profit growth to a certain extent.
Asset growth has declined somewhat. At the end of the first quarter of 2024, total assets increased 4.3% year-on-year to 14.2 trillion yuan, and the asset growth rate declined from 8.2% at the beginning of the year. Among them, the total loan amount was 8.2 trillion yuan, up 6.8% year on year, and deposit balance was 8.7 trillion yuan, up 2.1% year on year. The company's core Tier 1 capital adequacy ratio at the end of the first quarter was 10.44%, up 0.21 percentage points from the beginning of the year.
The decline in net interest spreads narrowed, and the performance was good. The company disclosed an average daily net interest spread of 1.27% for the first quarter, a year-on-year decrease of 6 bps. It was mainly affected by factors such as repricing of stock loans, mortgage interest rate adjustments, and another reduction in LPR for a term of 5 years or more. However, the decline in net interest spreads for the first quarter was significantly narrower than the decline of 20 bps in the previous year. On a month-on-month basis, net interest spreads for the first quarter rebounded by 5 bps compared to the fourth quarter of last year, and the performance was relatively good.
Net revenue from handling fees decreased year over year. Net fee revenue for the first quarter of 2024 fell 6.4% year on year, mainly due to a year-on-year decline in agent insurance and escrow fund business revenue, a decrease in interbank fee revenue due to fluctuations in interbank settlement business volume, and a decrease in penalty revenue due to a year-on-year decline in credit card default rates.
Asset quality is stable. The company's asset quality indicators did not change much. Among them, the defect rate at the end of the first quarter was 1.32%, down 1 bps from the beginning of the year; the attention rate was 1.53%, up 2 bps from the beginning of the year; and the provision coverage rate was 197%, up 2 percentage points from the beginning of the year. The company's “provision accrual/bad generation” in 2023 was 141%. The provision increase was sufficient, leaving room for net profit growth.
Investment advice: We slightly revise the profit forecast based on the quarterly report data to reflect the company's better net interest margin performance and the impact of falling asset growth. The company's 2024-2026 net profit is expected to be 954/989/103.7 billion yuan (previous forecast value: 953/981/102 billion yuan), a year-on-year growth rate of 2.9%/3.7%/4.8%; diluted EPS is 1.18/1.23/1.30 yuan; PE corresponding to the current stock price is 5.8/5.6/5.3x, PB is 0.52/0.49/ 0.46x, maintaining a “buy” rating.
Risk warning: The weakening macroeconomic situation may adversely affect the quality of bank assets.