Key points:
The growth rate of operating income is stable, and the contribution to investment income is increasing
In 2023, the revenue of the Shanghai Agricultural Commercial Bank increased by 3.07% year on year, and net profit to mother increased by 10.64% year on year.
2024Q1, operating income increased 3.69% year over year, and net profit to mother increased 1.48% year over year. The revenue growth rate in the first quarter increased slightly compared to the previous year. Mainly, growth in investment income led to an increase in the growth rate of non-interest income. The slowdown in profit growth was due to increased provision and credit impairment losses increased 72% year over year. In response to the new asset risk classification regulations, it is expected that the impact of one-time impairment accrual factors will increase. In terms of revenue structure, net interest income decreased by 0.26%/1.95% year on year in 2023 and 2024Q1, respectively, and net non-interest income increased 17.26%/20.98% year on year.
Steady asset expansion, focusing on science and innovation and inclusive finance
In 2023 and 2024Q1, the total assets of the Shanghai Agricultural Commercial Bank increased 8.65%/9.13% year on year, loans increased 6.09%/6.14% year on year, deposits increased 7.73%/6.16% year on year, and the business scale expanded steadily. In 2023, the loan balance for technology-based enterprises increased 29.92% year on year, inclusive small and micro loans increased by 21.55% year on year, green credit increased 41% year on year. The number of technology enterprise loan customers and the number of inclusive small and micro loan customers increased by 33.13% and 47.51% respectively, and credit growth momentum in key areas was strong. In the first quarter, public loans increased 1.57% from the beginning of the year, note discounts increased by 12.92% compared to the beginning of the year, and personal loans fell 2.69% from the beginning of the year. The decline in personal loans was mainly affected by early loan repayment factors.
Asset interest pressure still exists, and debt costs have been reduced
In 2023, the net interest spread of the Shanghai Agricultural Commercial Bank was 1.67%, down 16 BP year on year; loan interest rate was 4.24%, down 29 BP year on year, mainly affected by asset repricing, etc.; deposit cost ratio was 1.95%, down 6 BP year on year. The net interest spread of the Shanghai Agricultural Commercial Bank continued to decline in the first quarter due to heavy pricing. At the same time, deposit costs were reduced by a certain margin. The decline in interest spreads is expected to be close to the rate of change in industry interest spreads.
The quality of assets is relatively stable, and the level of capital remains abundant
At the end of the first quarter, the non-performing loan ratio of the Shanghai Agricultural Commercial Bank was 0.99%, up 0.02% from the end of the previous year. The non-performing loan ratio remained at an excellent level of less than 1%; the provision coverage rate was 381.84%, down 23.14% from the end of the previous year. Under the new risk classification regulations, new non-performing loan dilution provisions were generated; the target loan ratio was 1.27%, up from the beginning of the year. At the end of the first quarter, the Shanghai Agricultural Commercial Bank's core capital adequacy ratio was 14.49%, up from the end of the previous year. The new capital regulations were officially implemented this year. Refined capital measurement is beneficial to saving capital, and the capital level is among the highest in the listing market. The 2023 dividend rate is expected to be 30%, which remains high. The Board of Directors resolved to approve the 2024 mid-term dividend plan. Considering the abundant level of capital, there is room to increase the dividend ratio in the future.
Investment advice
The Shanghai Agricultural Commercial Bank has a regional resource advantage. Science and innovation finance has franchise characteristics. The retail transformation strategy continues to advance, insists on being smaller and diversified, and is expected to maintain market share and steady growth in scale in the future. At the same time, asset risk is relatively manageable, provision and capital levels are sufficient, and credit risk has room to be mitigated. The performance of agricultural and commercial enterprises in Shanghai is relatively stable, and high dividends are sustainable. The net profit growth rate for 2024-2026 is expected to be 3.69%/3.94%/6.37%, respectively, corresponding EPS of 1.34/1.40/1.48 yuan, respectively, and 0.57/ 0.52/0.49 times the PB corresponding to the current price. Maintain the “gain” rating of the Shanghai Agricultural Commercial Bank.
Risk warning
Demand for credit has fallen short of expectations; industry credit risk exposure has increased; market competition has intensified.