Introduction to this report:

Everbright Bank's 2024 quarterly report performance was in line with expectations. The net profit growth rate was corrected, asset quality indicators were basically stable, and the holding increase rating was maintained.

Key points of investment:

Investment advice: Taking into account financial performance and 2024 credit volume and price trend expectations, adjust Everbright Bank's net profit growth forecast for 2024-2026 to 0.34%/3.54%/4.86%, corresponding to EPS 0.61 (-0.18) /0.64 (-0.25) /0.67 (new) yuan. Maintain the target price of 3.85 yuan, corresponding to 0.48 times PB in 2024, and maintain an increase in holdings rating.

Revenue was under pressure, and the net profit growth rate recovered. 2024Q1 revenue fell 9.6% year on year, with the double effect of slowing credit investment and narrowing interest spreads. Net interest income for Q1 fell 11.7% year on year, which was the main drag on revenue. The increase in net revenue from handling fees and commissions was another drag on year. Although other net non-interest income increased 39.3% year over year, it was difficult to withstand the downward pressure of the first two incomes. Thanks to lower credit costs and effective levels, the net profit growth rate recovered.

The rate of table expansion has slowed, and the downward pressure on interest spreads is still there. Q1 Total assets increased 3.0% year over year, total liabilities increased 1.8% year over year, and the pace of table expansion was slowing down. Loans increased 5.2% year over year, and deposits remained basically the same year over year. The growth rate declined from the same period in 2023. According to estimates, the net interest spread for the Q1 quarter was 1.43%, down 11 bps from month to month. Mainly, the return on interest-bearing assets fell faster, the cost ratio of interest-paying debt remained flat, and interest spreads were still under pressure.

Asset quality is stable. The non-performing rate at the end of Q1 was the same as at the end of 2023. The provision coverage rate increased by 3.8pc to 185.1%, the loan ratio increased by 4bp to 2.31%, and risk offsetting capacity rebounded.

Risk Warning: Demand recovery fell short of expectations; retail loan risk exposure exceeded expectations.