Incident: On the evening of April 26, Qilu Bank released its 2023 Annual Report & 2024 Quarterly Report: it achieved operating income of 11.952 billion yuan in 2023, an increase of 8.03% over the previous year; achieved net profit of 4.234 billion yuan, an increase of 18.02% over the previous year. The weighted average return on net assets was 12.90%, up 0.98pct from the previous year.
2024Q1 achieved operating income of 3,022 billion yuan, an increase of 5.53% year on year, and realized net profit to mother of 1,178 billion yuan, an increase of 15.98% year on year. The weighted average return on net assets was 12.25%, up 0.9 pct year over year.
Comment:
The Q1 asset expansion rate exceeded 18%, and the “good start” contribution scale of credit increased in 2024. By the end of 2023, Qilu Bank's total assets exceeded 600 billion yuan, up 19.6% year on year, and the growth rate was up 3.74 pcts from the end of Q3; 2024Q1 continued the trend of rapid inventory expansion, and total assets grew 18.1% year on year. Since its launch in 2021, Qilu Bank's asset growth rate has been above 15% each quarter and year end, and the rate of expansion has been growing steadily. It mainly focuses on the new three-year development plan and digital transformation strategy, promoting high-quality enterprise cooperation, supporting “specialized and new” science and innovation businesses, responding to policy orientation, and improving credit investment efficiency for Shandong's “top ten industries” and green industries.
At the end of 2023, Qilu Bank's total loan volume exceeded 300 billion yuan, up 16.7% year on year; total loan volume increased 15.8% year on year at the end of 2024Q1. Among them, corporate loans mainly drive the growth rate of loan size. At the end of 2023 and the end of 2024Q1, the year-on-year growth rate of Qilu Bank corporate loans was around 20%.
Deposit absorption at the end of 2023 was 408.1 billion yuan, up 13.9% year on year; the amount of deposit absorption at the end of 2024Q1 increased 7% year on year. Under Shandong Province's “old and new kinetic energy conversion” policy, Qilu Bank is expected to benefit from continued regional economic growth, and scale expansion is expected to increase steadily.
Q1 Net profit to mother grew by 16%, and the dividend ratio increased. At the end of 2023, Qilu Bank achieved operating income of 11.95 billion yuan, up 8.03% year on year; 2024Q1 revenue grew 5.53% year on year, and the performance was still good. At the end of 2023, Qilu Bank's net profit to mother was 4.23 billion yuan, up 18.02% year on year, and the growth rate was 1.8 pct higher than at the end of Q3; 2024Q1's net profit to mother grew 15.98% year on year. We believe that the main reason is that Qilu Bank is strengthening all-round docking and cooperation with provincial and municipal state-owned enterprise customers, actively expanding high-quality listed companies, manufacturing, infrastructure, etc. to achieve rapid development in public loans and contribute to performance. In the future, Qilu Bank is expected to benefit from new growth points such as retail and intermediate business revenue to support performance. At the end of 2023, Qilu Bank's weighted average return on net assets was 12.90%, up 0.98pct from the end of '22. The dividend ratio in 2023 was 26.7%, up 1.2 pct from the end of 2022, indicating that it focuses on shareholder returns. Qilu Bank has excellent performance and is expected to further increase the dividend ratio.
Q1 The non-performing rate declined by 1 bps compared to the end of the previous year, and endogenous capital supplementation continued. By the end of 2023, Qilu Bank's non-performing loan ratio was 1.26%, down 3BP from the end of the previous year, and the 2024Q1 non-performing rate decreased by 1BP to 1.25%; the provision coverage rate at the end of 2023 was 303.58%, up 22.52 pcts from the end of the previous year. The 2024Q1 provision coverage rate was 304.8%, and the margin of safety continued to increase. We believe that Qilu Bank continues to dispose of stock loans, strictly controls risks during the offsite expansion process, and that bad indicators have been improved. Qilu Bank's capital index is relatively excellent. Among them, the core Tier 1 capital adequacy ratio continued to increase. At the end of 2023, it was 10.16%, up 43 BP from the end of 2023Q3, and continued to rise in 2024Q1 to 10.23%. In our view, it is mainly contributions such as endogenous profit retention and convertible debt-for-equity swaps. Sufficient capital lays the foundation for the next step in business development. Qilu Bank issued convertible bonds in November 2022. As of April 26, 2024, the company has converted 17.44% of its shares. We believe that the convertible debt-to-equity ratio is expected to continue to increase in the future, which will further supplement its core capital.
Profit forecasting and investment ratings: Qilu Bank has strong momentum to expand the sinking market, and is deeply involved in inclusive small and micro sectors. Under the downward trend in interest spreads, credit demand continues to rise to support stable revenue growth. Bad indicators continue to improve, asset quality is steady and improving, and the dividend ratio increased in 2023.
We forecast net profit growth rates of 18.68%, 18.85%, and 20.90% in 2024-2026, and EPS of 1.07 yuan, 1.27 yuan, and 1.53 yuan respectively in 2024-2026. We maintain Qilu Bank's “overweight” rating.
Risk factors: risks brought about by business transformation; stricter regulatory policies; risk of declining economic growth, etc.