1Q24 results are in line with our expectations
The company's 1Q24 net profit/profit before provision was -2.5%/-3.8%/-3.0% year-on-year, and the performance was in line with our expectations.
Development trends
Performance growth has slowed, and interest spreads have been better than expected. 1Q24 The year-on-year growth rate of the company's net profit/profit before provision and operating income was 4.9pp/ -1.6ppt in 2023, respectively. The net profit growth rate decreased significantly. The main reason was the year-on-year increase in the cost-revenue ratio, while the decline in impairment losses was narrower than in 2023. By business, net interest income fell 2.2% year on year. We estimate that interest spreads fell 3 bps from quarter to quarter. The performance was better than our expectations, mainly due to declining debt costs. Net revenue from handling fees fell 8.7% year on year, mainly affected by declining rates in the insurance and fund industries, and agency business revenue declined year on year. Other non-interest income increased 8.6% year over year. The growth rate slowed under the high base during the same period last year, and the positive contribution to revenue weakened.
Loan growth is steady, focusing on “three major projects” support and “five major articles”. 1Q24 The company's total assets increased 7.5% year on year, loans increased 11.1% year on year, and the growth rate decreased by 3.2pp/1.5ppt respectively from 2023. The company coordinated the balance of asset size and structure, and actively supported the construction of the “three major projects”. At the end of the first quarter, the company had a housing rental loan balance of 348.615 billion yuan, served more than 1,600 customers, and became the first commercial bank in the country to sign a cooperation agreement to provide personal housing loan services for affordable housing. At the same time, the company continues to make practical and in-depth “five major articles”. Take inclusive finance as an example. At the end of the first quarter, the company's inclusive finance loan balance was 3.28 trillion yuan, up 234.9 billion yuan from the beginning of the year. The number of inclusive finance loan customers was 3.41 million, an increase of 240,000 over the beginning of the year, and the coverage of the inclusive customer base continued to increase.
(continued on next page)
Profit forecasting and valuation
Profit forecast for 2024/2025 was slightly lowered. Taking into account the company's prudent planning policy, we slightly lowered the 2024E profit forecast by 2.4% to 325.9 billion yuan and the 2025E profit forecast by 3.5% to 329.9 billion yuan. The current A share price corresponds to 2024/2025 0.6 times/0.5 times P/B, and H shares correspond to 2024/2025 0.4 times/0.3 times P/B. Keeping the target price of A shares unchanged at 9.02 yuan, corresponding to 0.7 times the 2024 P/B and 0.7 times the 2025 P/B, there is 27.5% upside compared to the current stock price, maintaining the industry rating. Keeping the target price of H shares unchanged at HK$6.77, corresponding to 0.4 times the 2024 P/B and 0.4 times the 2025 P/B, there is 33.5% upside compared to the current share price, maintaining the outperforming industry rating.
risks
Macroeconomic uncertainty and the spread of risks in the real estate industry.