Incident: On April 29th, Bank of Ningbo released 24Q1 results. 24Q1 achieved revenue of 17.5 billion yuan, YoY +5.8%; net profit to mother of 70 billion yuan, YoY +6.3%; non-performing rate of 0.76%, provision coverage rate of 432%.
Overall performance grew steadily, and net interest income grew at an impressive rate. Bank of Ningbo 24Q1 revenue was +5.8% year-on-year, and net profit to mother was +6.3% year-on-year. The growth rates were -0.6 pct and -4.4 pct at the end of 23, respectively. Specifically, net interest income was +12.2% year-on-year, supported by volume and price performance. Revenue was still the main drag on revenue, at -22.8% YoY in 24Q1. Other non-interest income in 24Q1 was +3.0% year-on-year, but the growth rate declined by 12.7 pcts from '23.
Credit investment has grown rapidly, and interest spreads have rebounded marginally. 1) Credit investment accelerated. The total loan volume of Bank of Ningbo was +24.2% year-on-year in 24Q1, and the growth rate was +4.4pct compared to the end of 23. 24Q1 added 109.4 billion yuan in credit investment, an increase of 58.5 billion yuan over the same period last year. The strong credit investment of the Bank of Ningbo may reflect the Yangtze River Delta region's perception that economic recovery is one step ahead. Structurally, public loans are still the main direction of credit investment. In 24Q1, public, discount, and retail loans generally increased by 862, 94, and 13.7 billion yuan respectively.
2) Interest spreads bucked the trend and rebounded marginally. Bank of Ningbo's net interest spread was 1.90% in 24Q1, up 2BP from '23. Against the backdrop of concentrated impact of loan repricing in the first quarter, net interest spreads bucked the trend and rebounded, reflecting the Bank of Ningbo's strong ability to price loans. At the same time, with the help of the gradual release of the effects of this year's deposit listing interest rate cuts, subsequent interest spread performance is also expected to show high resilience.
The defect rate remained stable, and the attention rate fluctuated slightly. Bank of Ningbo had a defect rate of 0.76% at the end of 24Q1, the same as at the end of '23. In terms of forward-looking indicators, the attention rate at the end of 24Q1 was 0.74%, compared with +9BP at the end of 23.
The level of provision decreased slightly. The provision coverage rate at the end of 24Q1 was 432%, compared to the end of 23 - 29pct; the loan ratio was 3.27%, compared to the end of 23 - 23BP. The decline in provision coverage. First, the subsidiary Ningyin Consumer Finance is growing rapidly and the level of provision is relatively low, which has caused a certain drag on the Bank of Ningbo's provision coverage rate under the consolidated caliber of the Bank of Ningbo; second, the Bank of Ningbo has increased its efforts to dispose of bad write-off and disposal, which has consumed provision resources.
Investment advice: Strong loan growth and stable asset quality
Bank of Ningbo is deeply involved in the Yangtze River Delta region. It has excellent asset acquisition and pricing capabilities. The 24Q1 loan growth rate has increased markedly, interest spreads have rebounded marginally, and asset quality has remained steady, and overall fundamentals continue to perform well. As economic expectations continue to improve, the further recovery in credit demand and the resonance of the sector market will all benefit the restoration of the company's valuation.
EPS is expected to be 4.17, 4.52, and 4.96 yuan respectively in 24-26, and the closing price on April 29, 2024 corresponds to 0.8 times 24-year PB, maintaining the “recommended” rating.
Risk warning: Macroeconomic growth is declining; asset quality is deteriorating; the decline in net interest spreads in the industry exceeds expectations.