Incidents:
China Construction Bank announced its quarterly report for the year 24. 24Q1 achieved revenue of 200,928 billion yuan, a year-on-year growth rate of -1.18 PCT compared to 23; net profit to mother of 86.817 billion yuan, -2.17% year-on-year, and a growth rate of -4.61 PCT compared to 23.
Revenue growth is hampering revenue growth
CCB's revenue growth rate declined marginally in 24Q1, mainly due to a drop in revenue. CCB's revenue in 24Q1 was 39.278 billion yuan, -8.69% year-on-year. The growth rate was 8.40PCT compared to 23. It was mainly affected by the general decline in rates in the insurance, fund and other industries and the high base for the same period last year. The net profit growth rate of CCB declined marginally in 24Q1, mainly due to the expansion in the size of interest-bearing assets and a drag on provision estimates. In terms of performance attribution, the contribution of 24Q1 CCB's interest-bearing asset size and provision plan to net profit was +9.20% and +1.41%, respectively, compared to -3.61 PCT and -2.32 PCT in '23, respectively.
Credit investment remained strong, and interest spreads dragged down margins and weakened
CCB's net interest income in 24Q1 was 149.731 billion yuan, -2.19% year-on-year. The growth rate compared to +1.92PCT in '23. The marginal improvement in net interest income growth was mainly due to weakening interest spreads. Looking at credit investment, as of the end of 24Q1, CCB's loan balance was 24.98 trillion yuan, +11.14% year over year. The growth rate was compared to -1.46PCT in 23, and the overall credit investment boom was still good. Looking at new loans, the increase in credit investment of 24Q1 CCB was mainly supported by loans to the public. 24Q1 company added 1.17 trillion yuan in loans, of which domestic loans to the public increased by 1.37 trillion yuan, accounting for 117.51% of the new credit. In terms of loan investment, the new loans were mainly invested in policy support areas such as inclusiveness and green finance. Among them, 24Q1 inclusive finance loans and green finance loan balances were 3.28 trillion yuan and 4.45 trillion yuan respectively, +22.85% and +37.77%, respectively. Looking at the net interest spread, CCB's 24Q1 net interest spread was 1.57%, compared to 23-13 BP. The net interest spread narrowed marginally, mainly dragged down by the asset side. CCB's yield on interest-bearing assets in 24Q1 was 3.29%, compared to 23-16 BP. The expected decline in asset-side returns is mainly due to: 1) Multiple LPR cuts in '23 led to strong repricing pressure in 24Q1. 2) The impact of interest rate adjustments on pre-existing mortgages still needs to be digested. As of the end of '23, CCB's mortgage loans accounted for 26.82%. Looking at the debt side, deposits continued to be regularized. As of the end of 24Q1, CCB's demand deposits accounted for 42.87%, compared to -1.04PCT at the end of 23.
Stable asset quality and sufficient core capital
The overall asset quality remains stable. As of the end of 24Q1, CCB's non-performing rate was 1.36%, compared to 1BP at the end of 23. In terms of provision, as of the end of 24Q1, CCB's loan ratio and provision coverage rate were 3.24% and 238.17% respectively. Compared with -5BP and -1.68PCT at the end of 23, respectively, the provision plan and overall risk compensation capacity were quite adequate. In terms of capital, the 24Q1 core Tier 1 capital adequacy ratio of CCB was 14.11%, compared with +0.96PCT at the end of 23, with sufficient capital support for subsequent expansions.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue for 2024-2026 to be 7723.22, 7872.78, and 811.349 billion yuan respectively, with year-on-year growth rates of +0.34%, +1.94%, and +3.06%, respectively, and a 3-year CAGR of 1.77%. Net profit attributable to mother was 3343.39, 3424.38, and 354.683 billion yuan, respectively. The year-on-year growth rates were +0.51%, +2.42%, and +3.58%, respectively, and the 3-year CAGR was 2.16%. In view of the steady operation of the company, we maintained a target price of 7.64 yuan and maintained an “gain” rating.
Risk warning: steady growth falls short of expectations, asset quality deteriorates