Profitability remains stable. Bank of Communications 24Q1 revenue -0.03% year-on-year, and net profit to mother +1.44% year-on-year.
The annualized average return on assets and the annualized weighted average return on net assets were 0.71% and 10.79%, respectively. The 24Q1 core Tier 1 capital adequacy ratio increased by 21bp to 10.44% month-on-month, and has maintained an upward trend since 23Q2.
Asset quality continues to improve. The 24Q1 defect rate fell 1bp to 1.32% month-on-month, and provision coverage increased 1.84pct month-on-month to 197.05%. Among them, the corporate loan non-performing ratio fell 7 bps month-on-month to 1.58%. The company continuously monitors the key points and trends of the risk situation, strengthens risk identification, improves accurate measurement, maintains the strength of loan provisions, and has sufficient risk resistance and loss absorption capacity.
Credit investment grew steadily, and deposit structures were optimized. Total 24Q1 assets were +1.3% compared to the end of 2023, loans +3.1%, and deposits +1.5%. Current deposits accounted for 34.41%, up 8 bps from month to month. The company increased credit investment in inclusive small and micro industries, manufacturing, strategic emerging industries, green, agriculture, etc., to achieve reasonable total growth and structural adjustment and optimization.
Investment advice. We forecast EPS for 2024-2026 to be 1.16, 1.20, and 1.25 yuan (the original forecast was 1.17, 1.19, 1.27 yuan), and net profit growth rates of 0.95%, 3.10%, and 3.68%. We obtained a reasonable value of 7.73 yuan based on the DDM model (see Table 2); according to the PB-ROE model, the 2024E PB valuation was 0.60 times (0.56 times that of a comparable company), and the corresponding reasonable value was 7.85 yuan. Therefore, the target price was 7.73 yuan, corresponding to PE 6.66 times in 2024 (5.59 times PE for the same company) (the original target price was 6.50 yuan, corresponding to 2024 PE 5.58 times, +19%), maintaining the “better than the market” rating.
Risk warning: The solvency of enterprises has declined, asset quality has deteriorated dramatically; financial supervision policies have undergone major changes.