Incident: The company released its 2024 quarterly report, achieving operating income of 17.5 billion yuan, a year-on-year increase of 5.8%, net profit to mother of 7 billion yuan, an increase of 6.3% year-on-year, and a non-performing loan ratio of 0.76%, which remained flat from month to month.
Performance: High scale+interest spreads bucked the trend, with revenue and profit growth rates of 7.5% and 10.6% after deduction.
The growth rates of revenue and net profit to mother in the first quarter were 5.8% and 6.3% respectively. The growth rates were 0.6 pc and 4.4 pc lower than in 23. Mainly, 23Q1 had an asset disposal income of 284 million yuan. Excluding this factor, the revenue and profit growth rates reached 7.5% and 10.6% respectively, which was basically stable compared to 23. Look at the revenue side split:
1) Net interest income: 12% year-on-year increase, 3.2 pc higher than in '23. In addition to the 24% increase in loans supported by a year-on-year increase, the Q1 net interest spread was 1.90%, up 2 bps from '23. The banking industry was affected by factors such as heavy pricing and fierce competition for loans in the first quarter, and interest spreads generally had a lot of downward pressure (average drop of about 10 bps). Bank of Ningbo's interest spreads are expected to rise slightly against the market. It is expected that the interest rate spread performance will continue to be superior to that of its peers throughout the year, as well as the rapid development of asset-side Ningyin's consumer finance, leasing and other businesses, which will support return on assets.
2) Net income from handling fees and commissions fell 22.8% year on year, and the growth rate was the same as in '23. It is expected that the performance of valet services and wealth management-related agency businesses in the financial market will still be weak, in line with last year's trend.
3) The growth rate of other non-interest income increased by 3.0% year on year. Among them, the total profit and loss from changes in fair value+investment income+exchange profit and loss was 4.4 billion yuan, an increase of 400 million yuan over the previous year. Furthermore, in other comprehensive income (mainly profit and loss from changes in FV-OCI fair value, which is not included in the income statement before final disposal), revenue of 1.97 billion dollars has not yet been realized, and there is sufficient momentum for future performance growth.
Assets and liabilities: The scale of deposits and loans has increased dramatically.
1) Asset side: Total assets reached 2.89 trillion yuan at the end of March, an increase of 6.5% over the previous month. Among them, loan orders increased quarterly by 109.4 billion yuan (+8.7% month-on-month, +24.2% year-on-year) to 1.36 trillion yuan, an increase of 58.5 billion yuan over the previous year, and demand was strong. Among them, public loans increased by 86.2 billion yuan (+13.0% month-on-month), retail loans also increased by 13.7 billion yuan (+2.7% month-on-month), and bill discounts increased by 9.4 billion yuan (+11.2% month-on-month).
2) Debt side: The deposit volume reached 1.82 trillion yuan, up 253.7 billion yuan from the beginning of the year, and 16.2% higher than at the beginning of the year, reflecting its strong customer operating capacity. Among them, public deposits and retail deposits increased by 193.8 billion yuan and 59.9 billion yuan respectively.
Asset quality: Continue to be stable and superior.
1) The defect rate remained stable: at the end of March, the defect rate was 0.76%, unchanged from month to month. The concern category was 0.74%, a slight increase of 9 bps over the previous month, and the bad generation rate was 10.99%, up 29 bps from '23, but they are all still at a low level.
2) The size of the provision allowance continued to increase: At the end of March, provision coverage rate was 432%, down 29pc from month to month, and 0.22pc from month to month, mainly due to faster loan growth, some dilution of provision levels and an increase in bad generation rates. The 24Q1 credit account impairment loss was 3.2 billion, which was basically the same as last year (3.4 billion). Loan impairment provisions reached 44.6 billion, an increase of 790 million over the beginning of the year.
Investment advice: Bank of Ningbo's 2024Q1 performance is steady. Looking ahead to the full year, Bank of Ningbo's regional economic growth momentum is strong, and the year-on-year pressure on interest spreads is less than that of peers. While asset quality is steady, cost reduction and efficiency are also expected to improve the ability to release profits, and the performance is expected to remain stable. In the long run, Bank of Ningbo's 16 profit centers have opened up their doors and are both stable and growing. The net profit returned to mother for 2024-2026 is estimated to be 27.997/309.62/34.382 billion, respectively, maintaining a “buy” rating.
Risk warning: macroeconomic recovery fell short of expectations; capital market volatility continued to increase; exports fell beyond expectations.