occurrences

On September 30, the Postbank announced the savings agent rate adjustment plan.

reviews

The savings agency fee adjustment plan was announced as scheduled. Since 2007, the Postbank has established a “self-operation+agency” operating model. It is engaged in deposit absorption and other services through Post Group outlets, and pays savings agency fees to the Post Group in accordance with the principle of “fixed rate and phased billing”. In 2022, the Postbank and the Post Group negotiated to adjust the savings agent rate for personal deposit business and reset the trigger conditions for the passive adjustment. On March 29, 2024, the announcement of the 2023 results of the four major banks was completed. The average net interest spread of the four major banks was 1.44%, lower than the lower passive limit of 1.64% after the reset, once again triggering a passive adjustment.

The rate adjustment is large, which helps to contribute to profit growth. The rate adjustment of this adjustment plan was higher than that of 2022. The current deposit agent rate adjustment was larger than that of time deposits. Among them, the current deposit/notification deposit/fixed active deposit agent rates were reduced by 34 bpss/23 bpss/20 bps, respectively, and the 3 months/half-year/two-year/three-year deposit agent rates were reduced by 17 bpss/15 bpss/10 bpss/20 bpss/8 bps, respectively, and the five-year deposit agent rate remained zero. Based on the average daily deposit balance of agent outlets in 2023, the comprehensive rate was reduced by 16 bps (2 bps in 2022), saving 15.058 billion yuan in savings agency fees. After the rate adjustment plan is approved, it will be implemented from July 1, 2024. We estimate that the contribution to 2024/2025 net profit will be approximately 7.02 billion yuan/14.04 billion yuan, accounting for 8.1%/16.2% of the 2023 net profit.

Optimize the trigger conditions for the passive adjustment mechanism, and the application of the active adjustment mechanism will be strengthened in the future. Previously, the passive adjustment mechanism linked the average net interest spread of the four major banks in the last ten years. The changes were relatively lagging behind and could not reflect changes in the market environment in a timely manner. After this adjustment, the passive adjustment mechanism was changed to link the average net interest spreads of the four major banks in the last five years. In the future, when the average net interest spread of the four major banks is higher than 2.23% or less than 1.37%, it will trigger a passive adjustment. At the same time, taking into account changes in market interest rates, the actual operating needs of the Postsavings Bank, and the relationship between the increase in savings agency fees and the growth of the Postbank's revenue, etc., the Postbank will strengthen the application of the active adjustment mechanism in 2025 and beyond. We anticipate that savings agency rate adjustments are expected to become more marketable.

Keeping profit forecasts unchanged, the implementation of the mid-term dividend plan is expected to boost investment sentiment. The reduction in savings agency rates will help reduce agency costs and improve profit performance. However, considering the impact of subsequent stock mortgage repricing on revenue and the pressure on provision calculation, we kept the Postbank profit forecast unchanged, kept the target price of A-shares at RMB 6.15 and the outperforming industry rating unchanged, and kept the target price of H shares at HK$5.04 and the outperforming industry rating unchanged. The company disclosed its mid-term dividend plan. It plans to pay a cash dividend of RMB 1.477 for every 10 shares, with an annualized dividend rate of about 5.6%, with significant dividend investment value.

risks

Changes in net interest spreads in the industry have led to uncertainty about future savings agent rate adjustments.