Core views:
SPD Bank released its annual report for the year 23 and quarterly report for '24. The 23A and 24Q1 revenue growth rates were -8.1% and -5.7% respectively, and the PPOP growth rates were -11.0% and -6.7%, respectively. Net profit to the mother increased by -28.3% and +10.0% year-on-year, respectively. The company's historical burden was gradually cleared. Against the backdrop of negative 24Q1 revenue and PPOP growth, the performance was good, slightly exceeding investors' expectations.
Highlights: (1) Performance growth exceeded expectations. Net profit growth rates for the 23Q4 and 24Q1 quarters were -18.6% and 10.0%, respectively. The driving factors were mainly provision for backfeed and narrowing of negative net interest spreads.
Benefiting from a decrease in the year-on-year base, Q1 net interest income decreased by 6.4% year over year (VS.23q4: decrease 13.1%), impairment losses decreased by 20% year over year (VS.23q4: decrease by 13%), further increasing the performance contribution. (2) Asset quality continues to improve. The non-performing loan ratio at the end of March was 1.45%, down 3BP from the end of December; provision coverage at the end of March was 173%, down 0.7 PCT from the end of December; it was observed that the loan ratio increased by 2BP to 2.35% month-on-month; the estimated new bad generation rate was 1.01%, down 34 BP from 23Q1 and 14 BP from 23A. 23H2 The balance of non-performing loans remained flat, with personal non-performing loans falling by 1 billion yuan and corporate non-performing loans rising by 900 million yuan. Mainly, non-performing loans in the real estate industry increased by 5.1 billion yuan. (3) Net interest spreads have stabilized. The company disclosed a net interest spread of 1.52% for 23A, down 4BP from 23H1. According to our estimates, the net interest spreads for 23Q1-24Q1 in a single quarter were 1.54%, 1.52%, 1.53%, 1.41%, and 1.41%, respectively, and marginal interest spreads stabilized. The 24Q1 yield on interest-bearing assets and the cost ratio of interest-bearing debt varied from 23Q4 to -1BP and +1BP, respectively. After prior adjustments, the asset-side return may have reached the bottom. (4) The size of interest-bearing assets decreased month-on-month, but loan investment was restored. The Q1 scale decreased by 65.2 billion yuan, a year-on-year decrease of 128.8 billion yuan, mainly due to the cashout of investment assets, which decreased by 131 billion yuan (year-on-year decrease of 225 billion yuan); however, due to loan investment restoration, 24Q1 loans increased by 168.5 billion yuan, up 4.2% year on year (vs. 23 year-end year-on-year increase: 2.4%), and credit investment was earlier. 23Q4 loans increased 96.3 billion yuan, an increase higher than 23Q1, while the 22Q4 loan size decreased slightly. (5) The dividend ratio increased by nearly 10 percentage points to 30% in '23, and the dividend ratio was 21% in '22
Concern: (1) Core Tier 1 capital adequacy ratio declined after the implementation of the new capital regulations, falling 14BP month-on-month to 8.83% at the end of March. (2) There is a lot of pressure to increase deposits. 24Q1 deposits decreased by 58.3 billion yuan month-on-month, mainly due to a decrease of 119.9 billion yuan in corporate deposits, while loan investment was mainly on the public side.
Profit prediction and investment advice: Stock risk continues to be cleared, and credit investment is gradually repaired. The company's net profit growth rate for 23/24 is 9.2%/10.6%, EPS is 1.18/1.33 yuan/share, respectively, BVPS is 21.86/22.98 yuan/share, respectively, the closing price of A shares is 0.3X/0.3X for 23/24 PB, respectively, and 6.3X/5.6X for 23/24 PE, respectively. The company was given 0.4 times PB for 24 years, a reasonable value of 8.74 yuan/share, and a “buy” rating.
Risk warning: (1) Macroeconomics declined more than expected, and asset quality deteriorated sharply. (2) Consumption recovery fell short of expectations, and deposit regularization was serious. (3) Market interest rates are rising, and transaction books are at a loss.