Investment highlights: The Bank of Chengdu released its 2023 annual report and 2024 quarterly report. The company maintained double-digit growth in 24Q1, performed well in various asset quality indicators, continued to drop to 0.66%, balance and liabilities grew steadily, and maintained the company's “superior to market” rating.
Double digit growth continued in 24Q1. Bank of Chengdu 23Q4 revenue +0.1% YoY, net profit to mother +6.8% YoY; 24Q1 revenue +6.3% YoY, net profit to mother +12.8% YoY. The dividend ratio in 2023 was 30.05%, a slight increase compared to 2022, and has remained above 30%. The CET1 ratio in 24Q1 increased 23 bps month-on-month to 8.45%, and we expect it may benefit from the implementation of the new version of the Commercial Bank Capital Management Measures.
The performance of various asset quality indicators was excellent. In 2023 and 24Q1, the non-performing rate decreased by 3 bps and 2 bps to 0.68% and 0.66%, respectively. In 2023, the attention rate fell 2bps month-on-month to 0.41%. Although the provision coverage rate declined in 2023 (504.3%) and 24Q1 (503.8%) compared to 23Q3 (516.5%), it remained above 500%, ranking among the top listed banks. As of 23Q3, out of 41 listed banks, only 5 had provision coverage of more than 500%.
Assets and liabilities are growing steadily. The total assets of the Bank of Chengdu in 24Q1 were +8.0%, loans +10.4%, and deposits +6.9% compared to the end of the previous year. 23Q4 Total Assets +18.9% YoY, Loans +28.3% YoY, and Deposits +19.2% YoY.
The deposit-to-loan ratio in 23Q4 was 83.2%, up 5.63pct from 22Q4, and the asset structure continued to be optimized.
Digital transformation is accelerating. The company adheres to the digital transformation position of “technology+business” two-way integration and organic empowerment. At the end of 2023, the number of monthly active mobile banking customers reached 1.173,500, an increase of about 30% over the previous year, and the bank's digital channel business accounted for about 99% of transactions.
Investment advice. We forecast EPS of 3.39, 3.8, and 4.25 yuan in 2024-2026, with net profit growth rates of 10.73%, 12.00%, and 11.99%. We obtained a reasonable value of 20.41 yuan based on the DDM model; according to the PB-ROE model, the 2024E PB valuation was 1.00 times (0.62 times that of a comparable company), and the corresponding reasonable value was 19.48 yuan. Therefore, the reasonable value range is 19.48-20.41 yuan (corresponding to 2024 PE is 5.75-6.02 times, corresponding PE is 4.9 times that of the same company), maintaining the “superior to market” rating.
Risk warning: The solvency of enterprises has declined, asset quality has deteriorated dramatically; financial supervision policies have undergone major changes.