Incidents:
The Bank of Ningbo announced its quarterly report for the year 24. In 24Q1, it achieved revenue of 17.509 billion yuan, +5.78% year over year, growth rate of -0.63 PCT compared to 23; net profit to mother was 7.013 billion yuan, +6.29% year over year, and growth rate of -4.37 PCT compared to 23.
Mid-income revenue dragged down overall revenue, and provision for backfeed was weakened
The Bank of Ningbo's revenue growth rate declined marginally, mainly hampered by middle income. Bank of Ningbo's revenue in 24Q1 was 1,436 billion yuan, or -22.84% year-on-year. The performance of the main agency business is expected to remain weak. The net profit growth rate of the Bank of Ningbo declined marginally, mainly due to the slowdown in the expansion of the scale of interest-bearing assets and the weakening of provisions to feed back. In terms of performance attributions, the contribution of Bank of Ningbo's interest-bearing assets and provisions to net profit in 24Q1 was +14.29% and +1.72%, respectively, compared to -2.32PCT and -5.48PCT in '23.
Interest spread business performed strongly, and net interest spreads bucked the trend and rebounded
Bank of Ningbo's net interest income was +12.18% YoY in 24Q1, with a growth rate of +3.16PCT in 23 years. In terms of credit investment, as of the end of 24Q1, Bank of Ningbo's loan balance was 1.36 trillion yuan, +24.18% year-on-year, with a growth rate of +4.42PCT in 23 years. The rise in loan growth is mainly due to strong performance on the public side. Bank of Ningbo added 109.392 billion yuan in loans in 24Q1, including 86.230 billion yuan in public loans, accounting for 78.83% of the new loans, an increase of 41.037 billion yuan over the same period last year. Looking at the net interest spread, Bank of Ningbo's 24Q1 net interest spread was 1.90%, compared to +2BP in '23. Net interest spreads bucked the trend and are expected to be mainly due to improvements in debt-side costs. The average cost ratio of Bank of Ningbo's interest-bearing debt in 24Q1 was 2.13%, compared with -2BP in '23. The main factors are expected to be: 1) the reduction in deposit listing interest rates in '23 led to an improvement in overall deposit costs; 2) an increase in the share of structural deposits. As of the end of 24Q1, Bank of Ningbo deposits accounted for 68.88% of debt, accounting for +5.58PCT compared to the end of 23. There is still some pressure on the asset side. The average yield of Bank of Ningbo's interest-bearing assets in 24Q1 was 4.10%. Compared with 23-6BP, it is mainly due to heavy pricing combined with multiple factors such as stock mortgages.
Asset quality fluctuates slightly, and risk offsetting capacity is sufficient
From a static perspective, as of the end of 24Q1, Bank of Ningbo's non-performing rate and attention rate were 0.76% and 0.74%, respectively, compared to +0BP and +9BP at the end of 23, respectively. Looking at the dynamics, Bank of Ningbo's 24Q1 bad generation rate was 1.28% in a single quarter, +28BP compared to the previous quarter. Asset quality fluctuates slightly, and it is expected that it is mainly due to strong pressure from the retail side.
In terms of provision, as of the end of 24Q1, the Bank of Ningbo's loan ratio and provision coverage rate were 3.27% and 431.63% respectively. Compared with -23BP and -29.41PCT at the end of 23, respectively, the provision plan has weakened but remained high, and the overall risk compensation capacity is sufficient.
Profit Forecasts, Valuations, and Ratings
Considering the strong overall pricing pressure on banks, we expect the company's revenue for 2024-2026 to be 654.95, 715.77, and 79.340 billion yuan, respectively, with year-on-year growth rates of +6.35%, +9.29%, and +10.85%, respectively, and a 3-year CAGR of 8.81%. Net profit attributable to mother was 279.39 billion yuan, 310.72 billion yuan, and 34.823 billion yuan respectively. The year-on-year growth rates were +9.41%, +11.21%, and +12.07%, respectively, and the 3-year CAGR was 10.89%.
In view of the company's strong development resilience, we maintained a target price of 33.41 yuan and maintained a “buy” rating.
Risk warning: Steady growth falls short of expectations, and asset quality deteriorates.