2023 results are in line with our expectations
The company announced its 2023 results, with annual revenue and net profit to mother -8.4% and +2.1% year-on-year; 4Q23 revenue and net profit to mother -11.0% and -23.0% year-on-year, in line with our expectations.
Development trends
Active pressure reduction risk appetite responds to industry pressures. Ping An Bank's net interest income in 2023 was -9.3% year over year, 4Q23 net interest income was -18.7% year over year, net interest spread fell 19 bps month-on-month in 4Q23, and net interest spread for the whole year decreased 37 bps year over year. The decline in net interest spreads reflects the company's active adjustment of its asset structure and strict control of new risks due to reduced pressure, with a view to staying steady and far-reaching during the economic turbulence period. In 2023, corporate housing mortgage loans accounted for +0.4 pct, and credit cards and consumer loans accounted for -2.3 pct/+2.1 pct respectively; in terms of pricing trends, the average yield on retail and public loans in 2023 was 6.58%/4.00%, +0.1 pct/-0.8 pct, respectively.
The reduction in insurance consignment rates affected handling fee revenue, and other non-interest rates achieved high growth under a low base. The company's 4Q23 non-interest revenue was +17.9% year-on-year, mainly due to negative feedback from the 4Q22 bond market, which increased 4Q23's other non-interest income by 280.8% year-on-year, supporting the growth rate of non-interest income; 4Q23's net handling fee revenue was -17.1% year-on-year, mainly due to poor capital market performance, and insurance consignment rate adjustments reduced revenue space. The company's annual non-interest revenue was -6.1% YoY, with net processing fees and other non-interest charges -2.6%/+11.7%, respectively.
The quality of assets remains stable. By the end of 2023, the company's loan non-performing rate/attention/overdue rate was 1.06%/1.75%/1.42%, respectively, +2bp/-2bp/-1bp compared to the previous month. Real estate exposure risk improved. The company's real estate loan non-performing rate was -57 bps to 0.86% year on year; retail loan non-performing ratio was +5 bps year over year, with credit card/consumer loan/operating loan non-performing rates of +9 bp/+15 bp/+9 bps, respectively. We estimate that the company's net bad generation rate in 2023 was +22bp to 2.46% year over year. We expect that the net bad generation rate center is expected to continue to decline.
Organizational structure optimization and increased dividend rates are expected to create medium- to long-term investment value. Over the past six months, the company has improved overall management efficiency by streamlining the head office structure, integrating divisions, and strengthening branch authority. The company's dividend rate in 2023 increased sharply by 18pct to 30% year-on-year, and the dividend rate increased to 7% based on current stock prices. At the same time, benefiting from the company maintaining a relatively steady pace of expansion and refined capital management, the company's core tier 1 capital adequacy ratio increased by 58 bps to 9.22% in 2023; under static estimates, the company's core tier 1 capital adequacy ratio will drop 33 bps to 8.89% after dividends. We judge that in the medium term, the company's endogenous capital growth is highly sustainable. If the quality of the company's assets remains stable, the high dividend rate is expected to drive up the company's attention.
Profit forecasting and valuation
Based on the company's business adjustments and weak economic expectations, we lowered the company's 2024E revenue and net profit forecasts by 5.4% and 9.6% to 154.49 billion yuan and 47.37 billion yuan. For the first time, we introduced 2025E revenue and net profit forecasts to mother of 158.88 billion yuan and 48.78 billion yuan. The company is currently trading at 0.46x/0.42x2024e/2025e P/B. Taking into account recent changes in market risk appetite, we maintain the company's target price of 13.18 yuan unchanged, corresponding to 0.59x/0.55x 2024e/2025e P/B and 28.8% growth space. Maintain outperforming industry ratings.
risks
The macroeconomic recovery fell short of expectations.