Asset quality is improving, and scale continues to grow
According to ICBC's 2024 quarterly report, net profit, operating income, and PPOP for the first quarter were -2.8%, -3.4%, and -5.2% year-on-year, respectively. The growth rate was -3.6 pct, +0.3 pct, and +0.4 pct in 2023, and the revenue growth rate improved marginally. We forecast EPS of RMB 1.03/1.04/1.08 for 24-26, RMB 10.27 for BVPS for 24, and 0.52/0.37 times PB for A/H shares. The company's leading position is stable. Compared with the company's 24-year consistent expected average of A/H shares (0.57/0.40 times PB), we give A/H shares a 24-year target PB0.69/0.50 times, and A/H shares have a target price of 7.09 yuan/5.55 HKD, maintaining a buy/buy rating.
The scale continues to grow, and interest spreads fluctuate slightly
The growth rates of total assets, loans, and deposits at the end of March were +13.2%, +11.6%, and +9.5% respectively. Compared with +0.4 pct, -0.8 pct, and -2.7 pct at the end of 23, the asset size continued to grow. The January-March net interest spread was 1.48%, compared to -13bps in 2023. It is speculated that the marginal decline in interest spreads is mainly due to factors such as repricing of existing loans, adjustments in mortgage interest rates, and another reduction in LPR with a term of 5 years or more. At the same time, debt costs are more rigid. Demand deposits at the end of March accounted for 40.3%, down 0.5pct from the end of the previous year. Net income from 24Q1 interest was -4.2% year-on-year, and the growth rate was +1.2pct compared to 2023.
The growth rate of mid-income stabilized, and other non-intermittent fluctuations
Intermediate business revenue in the first quarter was -2.8% year-on-year. The growth rate was +4.9pct compared to the end of '23, and the mid-revenue growth rate improved marginally. Other non-interest income in 24Q1 was +2.1% year-on-year, and the growth rate was -24.1pct compared to '23. Among them, net exchange earnings were -224% YoY, which fluctuated greatly. The 2024Q1 cost-to-revenue ratio was +0.8 pct to 20.8% year over year.
The 24Q1 annualized ROA/ROE was -0.13pct/-1.16pct, respectively. The new loans added in 24Q1 were mainly public loans. The new retail/public/notes accounted for 17%/99%/-16% of the new loans respectively, and the credit structure was adjusted.
Asset quality is improving, and credit costs are declining
The non-performing loan ratio and provision coverage ratio at the end of March were 1.36% and 216%, respectively, the same as at the end of 23, +2pct. Asset quality is improving. The annualized credit cost in Q1 was 0.90%, -0.19pct; the Q1 annualized bad generation rate was +0.38pct to 0.48% month-on-month compared to 23Q4. The capital adequacy ratio at the end of March and the core Tier 1 capital adequacy ratio were 19.21% and 13.78% respectively, which was +0.11pct and +0.06pct at the end of 23, consolidating the capital level. The board of directors decided on the mid-term dividend arrangement. Based on the reviewed financial report for the first half of 2024, the company will reasonably consider the current performance situation and implement the 2024 mid-term dividend payment under the condition that profits can be distributed for the 2024 half year.
Risk warning: Economic recovery fell short of expectations, and the deterioration in asset quality exceeded expectations.