The revenue structure was optimized, and the net interest revenue growth rate improved marginally. As of 24Q1, the cumulative year-on-year growth rates of Bank of Ningbo's revenue, PPOP, and net profit to mother changed by -0.6 pct, 5.6 pct, and -4.4 pct at the end of 23, respectively. Looking at the breakdown, thanks to the combination of scale expansion and steady recovery in interest spreads, net interest income increased 3.2 pct to 12.2% year over year; net handling fee revenue continued to be under pressure, falling slightly by 0.1 pct to -22.8% from the end of 23; net other non-interest income fell 12.7 pct to 3.0% year over year from the end of 23. Although changes in investment income and fair value showed good growth, it was hedged to a certain extent by exchange gains and losses and asset disposal income.
The boom in public loans is high, supporting the acceleration of credit investment. As of 24Q1, the year-on-year growth rates of Bank of Ningbo's total assets and total loans changed by -0.3 pct and 4.4 pct respectively at the end of 23, and the year-on-year growth rate of loans increased to a high level of 24.2%. Looking at the credit structure, the main increase in the contribution to public loans was 5.5 pct and -2.3 pct year-on-year growth rate of public and personal loans, respectively, compared to the end of '23. The year-on-year growth rates of total debt and total deposits fell 0.3 pct and 6.0 pct respectively from the end of 23. Deposit growth was under pressure. Among them, public deposits were relatively resilient, accounting for an increase of 0.4 pct to 74.0% at the end of 23, and the advantage of low-cost debt was stable.
Net interest spreads rose 2 bps month-on-month. Bank of Ningbo's net interest spread in 24Q1 was 1.90%, up 2 bps from the end of '23. We believe that, on the one hand, the return on assets may have stabilized, and on the other hand, as stock deposits expire one after another, the effects of lower interest rates on early deposit listings may also be more reflected in 24 years.
The overall quality of assets is stable, and provision coverage has declined. As of 24Q1, Bank of Ningbo's non-performing loan ratio remained flat at the end of '23, maintaining an excellent level of 0.76%. The attention rate rose 9bps to 0.74% from the end of '23. We estimate that the 24Q1 credit cost ratio rose 42 bps to 1.20% from the end of 23, and the provision coverage rate decreased by 29.4 pcts to 431.6% from the end of 23, so there is still sufficient profit margin for backfeed.
Taking into account this year's special credit needs, pricing environment, and the company's 24Q1 business performance, we modestly raise interest spreads and forecast the year-on-year growth rate of the company's net profit to mother in 24/25/26 is 9.6%, EPS is 4.12/4.51/4.95 yuan, and BVPS is 30.34/34.30/38.64 yuan (original forecast value 30.34/34.28/38.59 yuan). The current stock price corresponds to the 24/25/26 PB of 0.75X/0.67X/ 0.59X Using the historical valuation method, refer to the PB (FY1) core in the past three years, maintaining a 35% discount, corresponding to 0.90 times PB in 24 years, and the target price is 27.31 yuan/share, maintaining a “buy” rating.
Risk warning
Economic recovery fell short of expectations; demand for credit fell short of expectations; asset quality deteriorated.