Key investment points: Bank of Chongqing's 24Q1 revenue increased 5.17% year on year, net profit to mother increased 4.04% year on year; revenue in 2023 fell 1.89% year on year, and net profit to mother increased 1.27% year on year. The company obtained qualifications such as an independent lead underwriter and a core trader of credit risk mitigation tools, etc., and the bond underwriting amount increased by 68%. The 24Q1 core tier capital adequacy ratio increased by 3 bps to 9.81% month-on-month, and the dividend ratio remained at 30%. We rated the company “superior to the market”.
The scale of business has been rising steadily, and individual business development is strong. In 24Q1, the company's total assets increased 2.75% year over year, total loans increased 10.9% year over year, and total deposits increased 9.2% year over year. The cost-to-revenue ratio was 21.98 percent, down 3.60 pcts from the same period in '23. Total assets increased 10.98% year on year in '23, total loans increased 11.45% year on year, and total deposits rose 8.42% year on year. Among them, the personal deposit business contributed significantly. Savings deposits exceeded 200 billion yuan in '23, and personal deposit amounts increased 20.18% year-on-year, accounting for 48.45% of total customer deposits, up 4.75pct from the end of '23.
The linkage capabilities of “commercial banks+investment banks” are constantly being enhanced. In 2023, the company deepened reforms and obtained qualifications such as an independent lead underwriter and core trader of credit risk mitigation tools. The amount of bond underwriting increased by 68%, the underwriting scale of non-financial corporate debt financing instruments exceeded 10 billion yuan, the “commercial bank+investment bank” linkage capacity was continuously enhanced, and the level of comprehensive financial services was further advanced.
The non-performing loan ratio has declined steadily. The 24Q1 defect rate fell 1bp to 1.33% month-on-month, and provision coverage fell 0.98pct to 233.20% month-on-month. The provision coverage rate increased 8.80pct month-on-month to 234.18% in '23.
The share of overdue loans at the end of 23 decreased by 0.62 pct compared to 23H1. The company promotes the elimination and settlement of defects, and the quality of assets is stable, moderate and improving.
Investment advice: We forecast EPS of 1.41, 1.47, and 1.56 yuan in 2024-2026, with net profit growth rates of 4.91%, 4.14%, and 5.39%. We obtained a reasonable value of 8.63 yuan based on the DDM model (see Table 2); according to the PB-ROE model, the 2024E PB valuation was 0.60 times (0.63 times that of a comparable company), and the corresponding reasonable value was 8.73 yuan. Therefore, the reasonable value range is 8.63-8.73 yuan (corresponding to 2024 PE is 6.11-6.18 times, corresponding PE is 4.7 times that of the same company), and the rating of “superior to the market” is given.
Risk warning: The solvency of enterprises has declined, asset quality has deteriorated dramatically; financial supervision policies have undergone major changes.