The Bank of Beijing is deeply involved in the region and operates steadily. Currently, the company's digital transformation is leading the steady progress of the five major transformations. The GBIC2 integrated financial service model is being explored and moving forward, and the restructuring of business logic is expected to inject new momentum into the company's sustainable development. Maintain the company's “increase holdings” rating.
Matters: On April 7, the Bank of Beijing released its 2022 annual report. The annual operating income and net profit returned to the mother increased +0.0% and +11.4%, respectively; the non-performing rate fell 0.16 pct to 1.43% from quarter to quarter.
Both assets and earnings recorded double-digit growth throughout the year. The company's net profit for the full year of 2022 was +11.4% year on year (growth rate +6.5% in the first three quarters). Looking at the disassembly: 1) the revenue side growth rate declined quarterly, and the annual operating income was +0.0% year on year (+3.2% compared to the first three quarters). Net interest income and fair value changes in the fourth quarter were under marginal pressure; 2) Cost reduction and efficiency on the expenditure side progressed, and the company's annual cost to revenue ratio was 26.55%, maintaining an optimal level in comparable industries, where investment in digital transformation increased further; in terms of provision, annual asset loss increased by the same ratio; in terms of provision, the annual asset loss ratio increased. -11.4% (compared to the previous three quarters) -2.4%), the provision factor became an important guarantee for the company's profit growth rate to reach the next level in the fourth quarter.
Make up for prices with volume, and asset expansion accelerates. The company's net interest income for the whole year was +0.1% year on year (+1.9% compared to the first three quarters). Looking at volume and price split: 1) The scale expanded significantly in the fourth quarter, and the company's total assets in the fourth quarter were +6.4% month-on-month. This is the best single-quarter growth rate in recent years. The annual asset growth rate achieved the first double-digit increase since 2018 (+10.8%). 2) There is still marginal pressure on net interest spreads. According to the disclosure, the company's net interest spreads for the first half of the year and the whole year were 1.77%/1.76% respectively. According to the average method at the beginning of the period and the end of the period, the net interest spread for a single quarter declined month-on-month or above by 5 bps or more, making up the price strategy for volume and had a marginal impact on interest spreads to a certain extent.
Mid-year income growth was strong, and other non-interest rate fluctuations increased in the fourth quarter. The company's annual non-interest income was -0.4% year-on-year (growth rate +7.5% in the first three quarters). Looking at the specific split: 1) Net revenue from processing fees and commissions increased 18.0% year on year (+27.0% compared to the first three quarters). Retail transformation drove the growth of related intermediary businesses to accelerate. Among them, agency revenue was +33.8% year on year, and settlement and clearing business revenue was +26.7% year on year; 2) Other non-interest income year-on-year (-5.2% compared to the previous three quarters), mainly due to: phased fluctuations in interest rates in the fourth quarter of the year, and the company's fair value fluctuated in the current quarter Recorded 1 billion Losses (100 million in the same period last year).
The quality of assets has improved, and provision adequacy has increased slightly. The company's non-performing loan ratio for the fourth quarter was 1.43%, an improvement of 0.01pct/0.16pct compared to the beginning of the year and the end of the third quarter respectively. There was also a positive trend in broad asset quality in the second half of the year. The attention rate and overdue rate decreased by 0.36pct/0.29pct respectively from the end of the year. It is expected that actual generation and write-off disposal will contribute positively. In terms of provisions, asset impairment losses were -11.4% year-on-year (-2.4% year-on-year for the first three quarters); the provision coverage rate for the fourth quarter was 210.0%, up 9.8 pct/15.1 pct from the previous quarter and the end of the year, respectively, and risk compensation capacity was further consolidated.
With strategic empowerment and strategy refinement, retail transformation has accelerated. Thanks to the leadership of digital transformation and the “full life cycle” service strategy, the company's retail transformation effect was further demonstrated: 1) At the customer level, the number of annual retail customers increased 7.3% to 27.53 million. Among them, the number of high-value VIP customers (+10.0%) and private bank customers (+15.2%) achieved better and faster growth; 2) At the scale level, the annual personal loan growth rate of 8.7% and the growth rate of savings deposits grew by 21.7%, which was higher than the growth rate of all bank loans and deposits by 1.3pct/9.6pct; the annual retail AUM grew 10.2% 974.9 billion; 3) In terms of efficiency, the share of annual retail business revenue increased by 6pct to 34.1%.
Risk factors: Macroeconomics fell faster than expected, leading to a sharp deterioration in asset quality.
Investment advice: The Bank of Beijing is deeply involved in the region and operates steadily. Currently, the company's digital transformation is leading the steady progress of the five major transformations. The GBIC2 combined financial service model is exploring and moving forward. The restructuring of business logic is expected to inject new momentum into the company's sustainable development. Considering the supporting effect of company allocation factors on profits in the fourth quarter, the company's 2023/24 EPS forecast was slightly adjusted to 1.11 yuan/1.24 yuan (original forecast of 1.05/1.16 yuan), and the company's 2025 EPS forecast was added to 1.39 yuan. The current company's stock price corresponds to 0.38x PB in 2023. Combined with the three-stage dividend discount model (DDM), the company's target valuation is maintained at 0.47x PB (2023), corresponding to the target price of 5.50 yuan. Maintain the company's “increase holdings” rating.