Profit growth accelerated before provision, ROE increased compared with the same period last year
The company released its quarterly report for 2020: 2020Q1 homing net profit increased by 10.71% year-on-year (13.03% in 2019), revenue increased by 10.32% year-on-year (10.54% in 2019), and total profit before provision increased by 17.91% year-on-year (16.96% in 2019). Q1 annualized weighted ROE 9.24% (2019 ROE 10.80%), up 4bp from the same period last year, mainly due to the sharp increase in profit and loss on financial investment disposal that led to the upside of ROA.
The return on investment has increased significantly, and the cost-to-income ratio has declined rapidly.
2020Q1 revenue growth is basically stable compared with 2019. Although the decline in the growth rate of interest-bearing assets led to a slight decline in net interest income compared with the same period last year, the sharp increase in financial investment disposal income accelerated the increase in non-interest income and made a positive contribution to revenue growth. At the same time, the cost-to-income ratio declined rapidly, driving the growth rate of PPOP to increase 95bp compared with 2019. On this basis, the company increased the provision, Q1 home net profit still maintained double-digit rapid growth.
The net interest margin rose month-on-month, and the asset-liability structure continued to be optimized.
According to estimates, the annualized net interest margin of 2020Q1 increased in one quarter compared with the previous quarter, which is mainly due to the decline in the cost rate of interest-bearing liabilities in a single quarter led by the optimization of the debt structure and the downward interest rate in the interbank market. Secondly, the increase in the rate of return on interest-bearing assets in a single quarter also has a certain positive contribution. In recent years, the asset-liability structure of the company has been continuously optimized, the proportion of deposits with relatively low cost rate and loans with relatively high yield is in the rising channel, and the end of Q1 has reached the highest level in the past two years. In the future, the asset-liability structure will continue to be optimized and the debt side will benefit from the downward interest rates in the interbank market, which will provide some pressure relief space for the net interest margin.
Strengthen the risk disposal of stock, and keep the quality of assets stable.
The classification of corporate loans is strict, and the overdue rate is at a low level of listed banks. 2020Q1 made plans in advance, took the initiative to increase the recognition and write-off of non-performing loans, and accelerated the downward relocation of concerned loans. At the end of Q1, concern loans accounted for 1.60%, which was lower than the average level of listed banks, with a month-on-month decline of 16bp. at the same time, the generation rate of non-performing loans in Q1 in the single quarter was 1.73%, which was at a controllable level. At present, the quality of the company's assets is sound, with a defect rate of 1.68% at the end of Q1, unchanged from the previous month, a provision coverage rate of 230.50%, an increase of 3.55 pct from the previous month, and an improved risk offset ability. As the stock risk is resolved, the company will travel light in the future.
Investment suggestion
The company has good fundamentals and promotes plate transformation in an orderly manner in accordance with the strategic positioning of "large retail business main thruster, company business stabilizer, financial market business booster". The convertible bond project is expected to be launched in 2020, and the scale expansion is expected after capital replenishment. We forecast that the growth rate of the company's homing net profit from 2020 to 2022 is 11.61%, 14.31% and 16.26%, respectively. In 2020, the corresponding BVPS is 4.09 yuan, and the corresponding PB is 1.02 times, which is upgraded to the "recommended" rating.
Risk Tips:
The net interest margin fell and the asset quality fluctuated.