Incident: Bank of Suzhou released its 2023 annual report and 2024 quarterly report. Revenue and profit increased 0.9% and 17.4% year-on-year respectively in 2023, 2.1% and 12.3% respectively in 24Q1, and 0.84% at the end of 24Q1, which remained flat for the past 2 quarters.
Performance: Revenue growth increased marginally, and profits maintained double-digit growth. Bank of Suzhou's 23A and 24Q1 revenue growth rates were 0.9% and 2.1%, respectively, with some marginal recovery. Profit growth rates were 17.4% and 12.3%, respectively, and continued to grow in double digits.
1. Net interest income 23A and 24Q1 were +1.7% and -0.8%, respectively. The net interest spread for the full year of 2023 was 1.68%, down 3 bps from the third quarter report, and continued to decline by 16 bps to 1.52% in 24Q1. It is expected that mainly asset-side interest rates will still be under downward pressure (repricing in the first quarter+decline in interest rates on new loans since the beginning of the year).
2. Non-interest income: Net income from handling fees in 2023 and 24Q1 decreased by 6.0% and 30.0%, respectively. It is expected that mainly the reduction in insurance agent rates will have a certain impact. In terms of other non-interest income, 23A and 24Q1 investment income+fair value change gain+loss on exchange increased by 4.5% and 66.0%, respectively. It is expected that the Q1 bond market performed well and earned a certain range of earnings, respectively.
Business: The scale of deposits and loans is growing steadily.
1) Asset side: At the end of March, assets reached 648.2 billion yuan (+7.7% month-on-month), loans reached 321.9 billion yuan, and 24Q1 had a net increase of 28.5 billion yuan, an increase of 9.7% month-on-month. Among them, public loans (including notes) increased by 27.3 billion yuan. Demand for a good start was relatively strong, and retail loans also increased by a net increase of 1.15 billion yuan.
2) Debt side: At the end of March, deposits reached $41.1 billion, up 47.3 billion month-on-month (+13.0% month-on-month), of which savings deposits increased 26.3 billion (+14.2% month-on-month), and public deposits increased by 21 billion yuan (+11.8% month-on-month).
Asset quality: Continue to be stable and excellent.
1. From a static perspective, the defect rate at the end of March was 0.84%, the month-on-month flat, and the attention rate was 0.77%, and the month-on-month decline continued to drop by 4 bps. At the end of 23, the overdue rate was 0.72%, down 1 bps from the interim report. By category, in the second half of 2023, the industrial defect rate decreased by 8 bps to 0.75%, while the retail defect rate increased by 10 bps to 1.02%, in line with industry trends.
2. In terms of dynamics, the bad generation rates for the whole of 2023 and 24Q1 were 0.32% and 0.33%, respectively, and continued to be low.
3. The provision coverage rate at the end of March was 492%, down 31 pc from the beginning of the year, about 4.13% from the loan ratio, and 0.25pc from month to month. Mainly, Q1 loans grew faster, and the level of provision was diluted to a certain extent.
Dividend ratio: In 2023, the plan is to distribute dividends of 0.39 yuan per share, with a dividend ratio of 31%, which is basically stable compared to the previous year, corresponding to a 24E dividend rate of 5.47%.
Investment advice: As a high-quality urban commercial bank in a high-quality region, Bank of Suzhou's asset quality is at the forefront of the industry, the profit growth rate remains leading in the industry, and it has a strong “margin of safety”. In the medium to long term, the company is a young and growing high-quality urban commercial bank, and its business license is constantly being improved, and it is expected to continue to develop rapidly and with high quality in the future, giving it a “buy” rating.
Risk warning: macroeconomic downturn; consumption recovery falls short of expectations; asset-side competition exceeds expectations.