Financial report summary: 1. China Merchants Bank 1Q24 revenue -4.9% YoY (vs 4Q23 -1.6%), net profit -2.0% YoY (vs 4Q23 5.2% YoY), marginal weakening of performance growth, combined drag on both income and non-interest income 2. Net interest was -0.7% month-on-month, and the average daily net interest spread for a single quarter fell 2 bps to 2.02% month-on-month, mainly due to asset-side drag. The yield on interest-bearing assets fell 3 bps to 3.65% month-on-month, and interest rate on interest-bearing liabilities remained 1.1.65% month-on-month. 3. Growth rate and structure of assets and liabilities: Inventory expansion has slowed slightly, and the share of loans has increased. (1) Assets (daily average): 24Q1 interest-bearing assets increased 5.7% year on year, down from 2023; total loans increased 6.3% year over year, with loans, bond investments, and interbank assets accounting for 63.4%, 25.6% and 5.3% respectively, accounting for +0.3, 0, and -0.1 pcts compared to 4Q23; 24Q1 daily loans increased by 138.8 billion yuan per quarter, a year-on-year decrease of 39.7 billion yuan. (2) Liabilities (daily average): Total liabilities increased 5.9% year on year; total deposits increased 6.3% year on year. Deposits, interbank debt, and debt issuance accounted for 84.9%, 10%, and 2.3% respectively, accounting for changes of -0.4, +0.2, and +0.2pcts compared to 4Q23. 4. Refinement of deposits and loans: Mainly public investment, retail investment is better than peer investment; personal demand is increasing month-on-month. (1) Loans: 1Q24 Added to public: retail: notes = 67:23:10.
The share of new retail sales decreased by 7.2 points to 22.7% compared to the same period last year. Although there was a slight decline, sales were still better than those in the same industry. Looking back at 2023, the share of new retail sales was also low in the first quarter, and is expected to increase in the subsequent quarters of '24. (2) Deposits: Corporate demand increased negatively month-on-month, personal demand increased 3.3% month-on-month, and the overall share of demand deposits decreased by 2.8 points to 52.1%. 5. Net non-interest rate was -2.9% YoY (vs. 4Q23 -2.2% YoY), and insurance premium cuts dragged down handling fees; other non-interest growth rates continued to rise year-on-year. (1) Net fee revenue was -19.4% YoY (VS4q23 -10.8% YoY), mainly due to the widening decline in wealth management, custody, and bank card fees.
Among wealth management fees, agency insurance income, which was mainly dragged down by rates, decreased by 50.3% year on year; while fiduciary wealth management income improved year on year, up 25.8% year on year, mainly due to a year-on-year increase in the scale of financial management sales. (2) Net other non-interest income increased 45.4% year over year (VS 4Q23, 28.3% year over year). 6. Retail customers and AUM: The number of Golden Sunflower and above customers and AUM both maintained double-digit growth, and the overall retail AUM was +10.5% year-on-year to 13.9 trillion yuan. 7. Asset quality: Overall optimization; continuous improvement in poor performance and overdue dates, and a slight increase in retail overdue rates. (1) Overall, the non-performing rate decreased by 3 bps to 0.92%; the overdue rate was 1.31%, +5 bps month-on-month; the provision coverage rate was 436.82% and the loan ratio was 4.01%, down 0.88 points and 0.13 points, respectively. (2) For the public sector: Both the non-performing rate and overdue rate have been reduced, and the quality of real estate assets continues to be optimized. The defect rate continued to decline month-on-month, -6bp to 1.09% month-on-month, and the overdue rate -6bp to 1.05% month-on-month. The real estate defect rate declined for 3 consecutive quarters, from -19 bps to 4.82% (3) retail sales: the non-performing rate remained stable, the overdue rate increased slightly, and the quality of consumer loan assets improved. The non-performing rate remained at 0.91%, the non-performing rate of mortgages, microcredit cards increased slightly month-on-month, and the consumer loan non-performing rate decreased by 6 bps to 1.03% month-on-month.
Investment advice: The company's current stock price corresponds to 2024E, 2025E, 2026E PB 0.91X/0.83X/0.76X; PE 6.41X/6.34X/6.28X. On the retail and wealth management circuit, CMB has gradually accumulated a “moat of business models”; a “corporate culture” (scarce in the banking industry) formed over a long period of time; and a large number of practical, hardworking, professional, and enterprising “team members” formed by middle and senior management and business backbone. These underlying values have not changed; they are still scarce and excellent banks in the industry, and are worth holding for a long time.
Based on the external economic situation and the company's fundamentals, we have fine-tuned our profit forecast and estimated net profit for 2024-2026 to be 146.7 billion yuan, 148.2 billion yuan, and 149.7 billion yuan (previous values were 151.9 billion yuan, 155.8 billion yuan, and 158.1 billion yuan).
Risk warning: The economic downturn exceeded expectations, and the company's operations fell short of expectations.