Introduction to this report:
The results reported by the Chongqing Agricultural Commercial Bank for the first quarter of 2024 were in line with expectations. Revenue stabilized, net profit declined to a certain extent, the pace of credit investment was balanced, asset quality remained stable, and the rating of increasing holdings was maintained.
Key points of investment:
The investment proposal takes into account financial reports and 2024 credit volume and price trend expectations, and adjusts the net profit growth forecast for 2024-2026 to 3.23%/5.40%/7.45%, corresponding to EPS 0.99 (-0.12) /1.04 (-0.21) /1.12 (new) yuan. Considering the current high dividend rate, the investment is cost-effective, and the target price was raised to 5.25 yuan, corresponding to 0.50 times PB in 2024, maintaining an increase in holdings rating.
Revenue stabilized, and net profit growth declined to a certain extent. 2024Q1 revenue fell 2.9% year on year, and the decline narrowed. Other non-interest net income increased by 46.7%, and investment income increased significantly, supporting revenue performance; the cost-revenue ratio fell 5.81 percentage points year on year to 27.21%, driving profit before provision increased 5.44% year on year. Under a strict risk control mechanism, Q1 credit impairment losses were accrued more often, resulting in a 10.8% year-on-year decrease in net profit.
The pace of credit investment tends to be balanced, and is better than retail sales to the public. The increase in 2023Q1 loans accounted for more than 70% of the annual increase. Under the guidance of regulation and the smooth pace of credit investment, the Chongqing Agricultural Commercial Bank's 2024Q1 credit growth rate slowed down, and the structure is still stronger than retail. The Q1 net interest spread (estimate) for a single quarter was 1.50%, mainly dragged down by the interest-bearing asset side. The downward pressure on interest spreads is still there. Combined with a slowdown in credit growth, Q1 net interest income fell 9.2% year on year.
Asset quality is generally stable. Compared to the end of 2023, the non-performing rate remained flat at the end of Q1. The provision coverage rate increased slightly by 0.8 pc to 367.5%, and the loan ratio decreased slightly by 1 bps to 4.36%.
Risk warning: Retail loan risk exposure exceeded expectations; Chongqing's regional economic growth fell short of expectations.