Incident: Zijin Bank released its 2023 annual report. During the reporting period, the company achieved operating income of 4.420 billion yuan, -1.93% year over year; realized net profit to mother of 1,619 billion yuan, +1.16% year over year; and ROE (weighted) of 9.10%, -0.54 pct year on year. By the end of the reporting period, the company's non-performing rate was 1.16%, 4BP year on year; provision coverage rate was 247.25%, +0.59pct year on year.
Profitability has remained stable, and agricultural and small and micro businesses are growing rapidly. In 2023, the company achieved operating income of 4.420 billion yuan, -1.93% year on year; net profit to mother was 1,619 billion yuan, +1.16% year over year. Revenue declined slightly, and profitability remained stable and steady. The company has outstanding business characteristics. Taking advantage of the advantages of 135 business outlets and 393 inclusive financial service points distributed widely in the Ningzhenyang region, it has gradually built a comprehensive and in-depth financial service network for Sannong, small and micro. Adhere to differentiated market positioning, and take advantage of the advantages of flexible policy transmission, strong team strength, and large number of outlets to become smaller and disperse, and sink down the customer base. The balance of agricultural and micro loans in 2023 was $109.254 billion, up $15.312 billion from the beginning of the year, accounting for 61.59%, or +3.03pct compared to the beginning of the year. The company's loan balance for inclusive small and micro enterprises was 32,577 billion yuan, up 4.187 billion yuan from the beginning of the year, or +14.75%; the number of loans to inclusive small and micro enterprises was 27,664, an increase of 6851 over the beginning of the year.
The scale has grown steadily, and the three major indicators have risen steadily. The company's total assets at the end of 2023 were 247.664 billion yuan, an increase of 22.942 billion yuan in 2023, +10.21% year over year; deposit balance was 19.774 billion yuan, an increase of 20.862 billion yuan over the beginning of the year, +11.86% year over year. The loan balance was $177.222 billion, up $16.926 billion from the beginning of the year, or 10.56% year-on-year. The size of the company continues to be at the forefront of agricultural and commercial banks in Jiangsu Province.
Relying on big data technology, risk control capabilities continue to improve. The company has built a comprehensive risk control system, relied on big data risk control technology to continuously explore intelligent risk control, give full play to the effective supporting role of the fintech system in case prevention, and continue to consolidate the risk management foundation. At the end of 2023, the company's non-performing rate was 1.16%, 4BP year on year; provision coverage rate was 247.25%, +0.59pct year on year.
Investment advice: Zijin Bank's profitability was steady and progressive in 2023. Based on regional advantages, agricultural and small and micro businesses had outstanding characteristics, corresponding to impressive business growth, and both loan amount and number of borrowers increased.
The overall size of the company has been growing steadily, and total assets, deposit balances, and loan balances have all shown a growing trend. Risk control capabilities continue to be enhanced based on big data technology. The company's revenue for 2024-2026 is estimated to be 46.13, 48.10, and 5.161 billion yuan, net profit to mother of 17.12, 17.75, and 1,838 billion yuan, and BVPS of 5.82, 6.35, and 7.18 yuan/share. The PB valuation corresponding to the closing price on May 7 is 0.46x, 0.42x, and 0.37x. The first coverage gives an “gain” rating.
Risk warning: The macroeconomy declined beyond expectations, asset quality deteriorated sharply, and interest rates on small and micro loans declined beyond expectations