Incident: Industrial Bank released financial reports for fiscal year 23 and 24Q1. It achieved operating income, net profit to mother of 2108.31 billion yuan and 77.116 billion yuan, respectively, -5.19% and -15.61%, respectively; in 24Q1, it achieved operating income and net profit to mother of 577.51 billion yuan and 24.336 billion yuan, respectively, +4.22% and -3.10% compared with the same period last year.
The weighted ROE for 23 and 24Q1 was 10.64% and 3.37%, respectively, -3.21pct and -0.36pct year-on-year, respectively. By the end of 24Q1, the company's defect rate was 1.07%, the same as at the end of 23; the provision coverage rate was 245.51%, +0.30pct at the end of 23. The company plans to pay 10.40 yuan for every 10 common shares. The cash dividend rate for common shares is 29.64%. The dividend rate has been increasing in the past 3 years.
Operating income was corrected year on year, and the decline in net profit narrowed. The company's revenue for fiscal year 23 and 24Q1 was $210.831 billion and $57.751 billion respectively, -5.19% and +4.22%, respectively. Revenue growth changed from negative to positive, and operating performance was steady, moderate to positive. Specifically, net interest income in 24Q1 achieved a positive increase of 37.242 billion yuan, +5.09% year-on-year, and a steady increase of 20.509 billion yuan in non-interest net income, or +2.69% year-on-year. The net interest spread is resilient. 24Q1 was 1.87%, -6BP month-on-month. The company achieved net profit of 77.116 billion yuan and 24.336 billion yuan in '23 and 24Q1, compared with -15.61% and -3.10%, respectively. The decline narrowed and leveled off. Among them, the net profit growth rate is lower than the revenue growth rate, mainly due to the company increasing its provision and planning efforts.
The overall scale has grown steadily, and the balance and liability structure continues to be optimized. The company's total assets and liabilities in 23 reached 101,583 billion yuan and 935.607 billion yuan, respectively, +9.62% and +9.89%, respectively; 24Q1 total assets and total liabilities reached 102572.55 billion yuan and 9424.077 billion yuan, and the overall scale continued to grow steadily. From the asset side, the performance on public loans is outstanding, and the asset layout is in line with the transformation direction of the real economy. 24Q1 loans to public loans (excluding notes) increased by 217.145 billion yuan over the end of '23. The average interest rate for new loans was 4.10%. Both the increase and price were good in the same industry. Technology finance loans and green finance loans increased by 7.54% and 7.66% respectively from the end of 23. On the debt side, total deposits in 24Q1 were 5103.789 billion yuan, down 33.284 billion yuan from the end of 23. The overall scale remained stable. The deposit interest rate was 2.12%, -12BP year on year. The cost reduction trend is beginning to show results.
Asset quality is stable, and risk resilience is enhanced. The company's non-performing rate at the end of '23 and 24Q1 was 1.07%, the same as -2BP year over year, and overall asset quality remained stable. At the end of '23 and 24Q1, the provision coverage rate was 245.21% and 245.51%. Compared with +8.77pct and +12.70pct, 24Q1 reduced potential risk by 16.056 billion yuan, consolidating the performance foundation and increasing risk resilience.
Investment advice: Societe Generale Bank's overall performance was steady, moderate and positive. The revenue for the first quarter of '24 was positive year on year, and the decline in net profit narrowed and stabilized. Assets are growing steadily, and the performance on public loans is impressive, and the price volume is at a good level in the same industry. The provision plan has been strengthened, and the ability to withstand risks is stronger. The company's revenue for 2024-2026 is estimated to be 2128.95, 218.936, 228.283 billion yuan, net profit due to mother of 779.64, 798.10, 83.297 billion yuan, and BVPS of 37.63, 41.15, and 44.71 yuan/share. The PB valuation corresponding to the closing price on May 17 is 0.47, 0.43, 0.40 times. Maintain a “buy” rating.
Risk warning: Macroeconomic growth is declining, net interest spreads are falling beyond expectations, and asset quality is deteriorating.