Net profit fell 10.8% year on year under high base, and net profit before provision increased 5.4% year on year. The first quarter of 2024 achieved revenue of 7.13 billion yuan (YoY, -2.9%) and net profit to mother of 3.52 billion yuan (YoY, -10.8%).
The weighted average ROE for the year was 12.01%, down 2.66 percentage points year over year. The large decline in net profit due to changes in credit impairment losses in the first quarter was mainly due to changes in credit impairment losses. Credit impairment losses for the current period were 1,333 billion yuan, an increase of 1,203 billion yuan over the same period last year. This is mainly due to the large amount of non-performing assets that were disposed of and recovered during the same period last year. The amount accounted for 70.8% of the whole year, resulting in a high net profit comparison base for the first quarter. Profit before provision for the current period increased by 5.4% year on year, achieving good growth.
The decline in revenue narrowed, and non-interest income achieved relatively good growth. Revenue for the first quarter fell 2.9% year on year, and the decline was 0.7 percentage points narrower than for the full year of 2023. Mainly due to declining interest rates in the bond market, other non-interest income increased 47% year on year in the first quarter. Meanwhile, fees and other commission revenue increased by 0.2% year over year, and decreased by 6.4% for the full year of 2023.
Net interest income continued to decline, and the company's cost-revenue ratio decreased by 5.8 pct year-on-year. The net interest spread disclosed by the company in the first quarter was 1.64%, down 9 bps from the full year of 2023. The narrowing of net interest spreads dragged down a 9.2% year-on-year decline in net interest income in the first quarter. Total assets at the end of the period were 1.49 trillion yuan, up 3.5% from the beginning of the year. Among them, the loan balance was 0.70 trillion yuan, up 3.0% from the beginning of the year, and the deposit balance was 0.95 trillion yuan, up 3.5% from the beginning of the year, and the asset scale expanded steadily. The company actively optimized resource allocation and took more measures to reduce costs and increase efficiency. Costs and revenue for the first quarter decreased by 5.8 percentage points to 27.2% compared to the same period last year.
After the burden of bad stock was reduced, the quality of the company's assets was stable. In recent years, the company has continuously stepped up its efforts to dispose of and recycle defective stocks. At the same time, it is actively controlling new defects, and the book defect rate continues to decline. The non-performing loan ratio at the end of March 2024 was 1.19%, the same as at the end of the previous year, and asset quality was stable. The provision coverage rate at the end of the period was 367.5%, an increase of 0.84 percentage points over the end of the previous year. The provision coverage rate was high.
Investment advice: The decline in the company's net profit to mother in the first quarter was mainly due to the high base impact of the large scale of bad recycling in the first quarter of last year. In recent years, the company has continuously stepped up efforts to clear non-performing assets, which supports profit performance. We expect this trend to continue in 2024. We maintain the 2024-2026 net profit forecast of 118/130/14.3 billion yuan, corresponding to a year-on-year growth rate of 8.4%/9.6%/10.0%; diluted EPS was 1.02/1.12/1.24 yuan; PE corresponding to the current stock price is 4.2/3.8/3.5x, and PB is 0.39/0.36/0.34x, maintaining the “increase” rating.
Risk warning: The weakening macroeconomic situation may adversely affect the quality of bank assets.