1Q24 results were slightly better than our expectations
Bank of Beijing announced 1Q24 results: 1Q24 revenue increased 7.8% year on year, and net profit to mother increased 5.0% year on year, slightly better than our expectations, mainly due to the relatively rapid growth of other non-interest income.
Development trends
The scale has maintained a relatively rapid growth rate. Total assets, total loans, and deposits increased 11.2%, 11.6%, and 9.2% year-on-year respectively at the end of 1Q24. We expect the net increase in loans to be mainly due to loans to the public. The company revealed that RMB loans to public loans (excluding discounts) increased by 90.9 billion yuan, or 8.2%, compared to the beginning of the year. Of this, the Beijing region invested a total of 102.5 billion yuan, fully reflecting the “home market advantage.”
Interest spreads declined month-on-month. 1Q24 net interest income increased 1.9% year over year. We estimate that the average net interest spread at the beginning and end of the 1Q24 quarter fell 4 bps to 1.35% month-on-month. We expect the yield on interest-bearing assets to decline by 7 bps to 3.33% month-on-month. There was an improvement in the 1Q24 interest-paying debt cost ratio, which declined by 3 bps to 2.30% over the previous quarter. The company focuses on core deposit management. The average interest rate for RMB retail deposits fell 7 bps from the beginning of the year, and the average interest rate of RMB to public deposits fell 8 bps from the beginning of the year.
Other non-interest revenue growth drives revenue. Net fee revenue for 1Q24 decreased 16.1% year over year. Interest rates in the bond market continued to decline in the first quarter, driving other non-interest income to maintain a high growth rate of 51.1% year on year. Among them, investment income increased 47.2% year on year, and income from changes in fair value increased by 240 million yuan year on year.
Asset quality is improving steadily. At the end of 1Q24, the defect rate fell 1bp to 1.31% month-on-month; we estimated that the 1Q24 defect generation rate was 0.69%, a decrease of 4 bps month-on-month. Asset impairment losses increased by 23.5% year on year in 1Q24; credit costs fell 42 bps month-on-month in a single quarter; provision coverage decreased by 3.7 ppt to 213.1% from quarter to quarter. The company continues to improve the “whole group, all category, full process” risk management mechanism, empowers risk management and control through digital transformation, and continuously improves the quality and efficiency of bad disposal.
Profit forecasting and valuation
Due to the rapid growth of other non-interest income, we raised our 2024 profit forecast by 0.9% to $26.58 billion, and our 2025 profit forecast by 1.7% to $27.86 billion. The current stock price corresponds to 0.44x/0.41x2024E/2025E P/B. Maintaining an outperforming industry rating, considering the steady improvement in performance growth and steady progress in bad disposal, we raised our target price by 6.7% to 6.36 yuan, corresponding to 0.50x/0.47x2024E/2025E P/B, which has 15.0% upside compared to the current stock price.
risks
Interest spreads declined more than expected, and asset quality deteriorated beyond expectations.