Introduction to this report:
Zheshang Bank's revenue and net profit growth rate in 2023 was in line with expectations. The total asset growth rate was as high as 19.9%, and the rate of expansion was significantly higher than that of other stock banks. Profit release was positive, asset quality indicators improved, and the shareholding increase rating was maintained.
Summary:
The investment proposal takes into account the 2023 financial report and 2024 credit volume and price trend forecast, and adjusts Zheshang Bank's 2024-2026 net profit growth forecast to 3.61%/6.57%/7.66%, corresponding to EPS 0.57 (-0.07) /0.60 (-0.13) /0.65 (new) yuan. Taking into account the AH share premium situation and the possibility that the company's future profit growth rate will slow down, the target price was lowered to HK$3.73, corresponding to 0.55 times PB in 2024, maintaining the holdings increase rating.
The rate of table expansion increased, and credit growth remained high. The revenue growth rate in 2023 increased by 0.2 pc to 4.3% compared to the previous three quarters, and the Q4 revenue growth rate increased 1.8 pc month-on-month. The performance was superior to that of peers. The main contributing factor was scale expansion. Zheshang Bank's total asset growth rate in 2023 was 19.9%, 13 percentage points higher than the average of other stock banks. The total assets have already exceeded 3 trillion yuan, and the financial investment growth rate has reached 33.1%, which is the main supporting factor for the expansion of the balance sheet. Credit performance was also impressive. The loan balance increased by 12.4% year on year in 2023, of which the balance of loans to public loans increased by 14.3% year on year. In terms of debt, the deposit growth rate was 11.1%, which is also ahead of other stock banks.
Profit growth was strong. The net profit growth rate in 2023 was as high as 10.5%, 14 percentage points higher than the average of other listed stock banks. Credit costs fell 22bp year-on-year after bad burdens were reduced, supporting profit performance. The net interest spread in 2023 was 2.01%, a year-on-year narrowing of 20 bps, and the absolute value is still among the highest in the stock market. Looking at the breakdown, the yield on interest-bearing assets fell by 14 bps compared to the first half of the year, due to a decline in loan yields. At the same time, the share of investment in interbank assets and bonds with lower yields increased, and there was also some drag. The cost ratio of interest-paying debt and deposit cost ratios remained stable.
Core asset quality indicators are stable, and forward-looking indicators have improved markedly. Compared with the end of Q3, the non-performing rate decreased by 1 bps to 1.44%, the provision coverage rate decreased by 0.34pc to 182.60%, and the loan ratio decreased by 2 bps to 2.63%, which is basically stable. By industry, the non-performing ratio for public loans decreased by 22 bps to 1.37% compared to the end of June, the non-performing rate and non-performing balance for leasing services and the manufacturing industry all declined markedly, and the non-performing ratio of retail loans rose 41 bps to 1.91% from the end of June. It is speculated that it may be related to consumer loans. The overdue rate, attention rate, and bad generation rate decreased by 14 bps, 3 bps, and 24 bps, respectively, from the end of June. Forward-looking asset quality indicators improved markedly, and bad pressure decreased.
Risk Warning: Demand recovery fell short of expectations; retail loan risk exposure exceeded expectations.