Incident: Qilu Bank's revenue and profit in 2023 increased 8.0% and 18.0% year-on-year respectively; 24Q1 increased 5.5% and 16.0% respectively; the non-performing rate at the end of 24Q1 was 1.25%, down 1 bps from the beginning of the year.
Performance: Revenue growth was steady, and profit growth rate remained 15% +.
Qilu Bank's 23A and 24Q1 revenue growth rates were 8.0% and 5.5% respectively, which was relatively stable. Among them, the slight decline in the 24Q1 growth rate was mainly due to a slowdown in net interest income growth due to downward pressure on interest spreads. Profit growth rates were 18.0% and 16.0% respectively, maintaining a high level.
Looking at the revenue side breakdown:
1. Net interest income: +3.5% and +0.5% year-on-year in 23A and 24Q1, respectively. The net interest spread for the full year of 2023 was 1.74%, and the cumulative decline was 22 bps for the whole year. The decline was basically the same as the industry. 24Q1 is expected to have downward pressure on interest spreads (factors such as heavy pricing and fierce competition), which is dragging down the growth rate of net interest income.
Looking at the breakdown, loan interest rates for the second half of 2023 fell by 10 bps to 4.67% compared to the interim report. Among them, retail and public loan interest rates decreased by 17 bps and 7 bps respectively (mortgage loans at the end of 2023 accounted for 18%, and the reduction in stock mortgage interest rates dragged down retail loan yields). The annual deposit cost rate continued to drop by 3 bps to 2.11% compared to the interim report.
2. Non-interest income: Net fee revenue for the full year of 2023 fell 9.4% year on year, and the 24Q1 recovery showed positive growth of 4.3%. It is expected to contribute mainly to the recovery in financial management revenue. In terms of other non-interest income, 23A and 24Q1 investment income plus fair value change profit and loss all grew by more than 50% year-on-year, supporting revenue.
Business: The scale of deposits and loans is growing steadily.
1) Asset side: At the end of March, assets reached 624.8 billion yuan (+3.3% month-on-month), loans reached 317.7 billion yuan, and 24Q1 had a net increase of 17.5 billion yuan (+5.8% month-on-month). Among them, public loans increased by 13.7 billion yuan (+6.6% month-on-month), and retail loans increased by 1.8 billion yuan (+2.2% month-on-month), and personal credit demand is still weak.
2) Debt side: At the end of March, deposits reached 402.6 billion yuan, an increase of 1.1% over the previous month, mainly due to personal deposit contributions. Q1 increased by 8.6 billion yuan, and corporate deposits decreased by 4.1 billion yuan.
Asset quality: The trend of improvement is clear.
1. From a static perspective, the defect rate at the end of March was 1.25%, down 1 bps month-on-month, 1.32%, and 6 bps month-on-month. At the end of 23, the overdue rate was 1.00%, down 0.06pc from the interim report, continuing the improvement trend. In key areas, the year-end real estate defect rate fell rapidly to 1.37% from 6.77% of the interim report, the non-performing amount fell from 360 million to 60 million, and the retail non-performing rate reached 1.18% at the end of the year, an increase of 21 bps over the mid-term report, which is in line with industry trends.
2. In terms of dynamics, the bad generation rate for the full year of 2023 was 0.70%, down 0.07pc from the interim report.
3. The provision margin continued to increase: The provision coverage rate at the end of March was 305%, slightly higher than the increase at the beginning of the year by 1.2pc, the loan ratio was about 3.81%, and the month-on-month decrease was 0.02pc.
Dividend ratio: In 2023, the plan is to distribute dividends of 0.22 yuan per share, totaling 1,064 million yuan, accounting for 26.73% of profit. The dividend ratio remains stable, corresponding to the 24E dividend rate of 4.60%.
Investment advice: Qilu Bank has been in the asset quality improvement range in recent years. Although its performance is still under pressure due to declining interest spreads in the short term, it is still expected to remain relatively stable compared to its peers. Net profit due to mother for 2024-2026 is estimated to be 48.62/56.27/6.527 billion, respectively, maintaining a “buy” rating.
Risk warning: Macroeconomic downturn; real economic recovery falls short of expectations.