Credit investment is stable, and capital levels are consolidated
CCB's net profit, operating income, and PPOP for the first quarter of 2024 were -2.2%, -3.0%, and -3.8%, respectively. The growth rate was -4.6pct, -1.2pct, and -1.6pct compared to 2023. The 24Q1 annualized ROE and ROA were -1.27pct and -0.11pct to 11.59% and 0.89%, respectively. We forecast an EPS of 1.33/1.36/1.42 yuan for 24-26, and a BVPS of 12.73 yuan for 24, A/H corresponding to 0.56/0.36 times PB. A/H shares are comparable to the 24-year wind forecast of PB 0.56/0.40 times. The company's “new finance” continues to advance, beginning a second growth curve, and should enjoy a valuation premium. We gave A/H shares a 24-year target PB0.73/0.48 times, and A/H shares had a target price of 9.31 yuan/6.62 HKD, all maintaining a “buy” rating.
Scale expansion is slowing down, and interest spreads are still under pressure
The growth rates of total assets, loans, and deposits at the end of March were +7.5%, +11.1%, and +6.9%, respectively. Compared with -3.2 pct, -1.4 pct, and -3.6 pct at the end of 23, the scale continued to grow but the growth rate slowed down. The new loans added in the first quarter (domestic caliber) were mainly a contribution to the public sector, and there was a reduction in notes. Public, retail, and notes account for 120%, 11%, and -31% respectively. Realize the “Five Big Articles”. At the end of March, the balances of technology loans, green loans, and inclusive finance loans reached 1.80 trillion yuan, 4.45 trillion yuan, and 3.28 trillion yuan respectively.
The net interest spread for January-March was 1.57%, compared to -13bp in 2023. The estimate was mainly dragged down by the asset side or mainly affected by heavy pricing factors. The trend of deposit fixed-term deposits continues. The deposit balance rate (domestic caliber) at the end of March was -0.7 pct to 44.3% at the end of 23.
Earnings continue to be under pressure, and other non-interest rates are rising
24Q1 non-interest income was -5.2% YoY (+8.9% YoY), mainly hampered by mid-term earnings. Net revenue from 24Q1 fees and commissions was -8.7% YoY (-0.3% YoY), mainly affected by the general decline in insurance, fund and other industry rates and the high base for the same period last year. Revenue from agency services declined year-on-year; bank card fee revenue continued to grow. 24Q1 Other non-interest income was +8.6% YoY (+55.3% YoY), of which investment income, fair value change gain/loss, and exchange gain/loss were -28.7%, +59.2%, and +15.3%, respectively. 24Q1 cost-revenue ratio was 22.1%, year-on-year +0.6pct.
Credit costs are declining, and capital levels are being consolidated
The non-performing loan ratio and provision coverage ratio at the end of March were 1.36% and 238%, respectively. Compared with -1 bp and -2pct at the end of March, the non-performing rate was steadily declining, and asset quality was steady and improving. The estimated annual credit cost in 24Q1 was 0.79%, -0.16pct year on year. The decline in credit costs drove profit release. The estimated annual bad generation rate in 24Q1 was 0.57%. Compared with 23Q4, +0.22pct month-on-month, there was a slight increase in bad generation, but it is still at a low level. The capital adequacy ratio at the end of March and the core Tier 1 capital adequacy ratio were 19.34% and 14.11%, respectively, compared with +1.39pct and +0.96pct at the end of 23, consolidating the capital level.
Risk warning: Economic recovery fell short of expectations, and the deterioration in asset quality exceeded expectations.