Credit is expanding at an accelerated pace, and asset quality is improving
Net profit, revenue, and PPOP returned to the mother in '22 at +11.4% and remained flat at -2.1% compared to +4.9pct, -3.2pct, and -3.2pct from January-September. Revenue growth slowed down or was due to fluctuations in non-interest income. In view of accelerated asset expansion and declining credit costs, we forecast EPS of 1.31/1.45/1.60 yuan for 2023-25 and BVPS forecast value of 11.91 yuan for 23, corresponding to PB0.37 times. Comparable to the company Wind in '23, unanimously predicted an average PB value of 0.66 times. The Bank of Beijing will continue to promote retail transformation and increase its digital transformation efforts, but since it is still in the transition period, we gave a target PB of 0.50 times for 23, with a target price of 5.96 yuan, maintaining the “increase in holdings” rating.
Loan expansion is speeding up, and interest spreads are declining marginal
The company's total assets, loans, and deposits at the end of '22 were +10.8%, +7.4%, +12.8% compared to +6.6pct, +2.9pct, and +1.8pct at the end of September. New loans added in the second half of '22 were mainly retail loans, and the pressure on notes dropped. New retail sales and public loans accounted for 188% and 35% respectively. The company is deeply involved in financial inclusion and focuses on dual carbon goals. The balance of inclusive finance loans at the end of '22 was +8.9% compared to the end of June, accounting for 9.6% of the bank's loans; the balance of green finance loans was +18.6% compared to the end of June, accounting for 6.1% of loans across the bank.
The net interest spread in '22 was 1.76%, compared to January-June-1 bp, mainly affected by the asset side. The company's return on interest-bearing assets and interest-bearing debt cost ratios in '22 were 3.85% and 2.14%, respectively, compared to January-June -2 bp and -3 bp; loan yield and deposit cost ratios were 4.36% and 2.02% respectively, compared to +1bp and +1bp in January-June.
Non-interest income fluctuates, retail transformation deepens
Mid-year income was +18.0% year-on-year, compared to January-September -9.1pct. Affected by capital market fluctuations, agency and commission business revenue in '22 was +33.8% year-on-year, compared to January-June -11.9pct. Affected by the Q4 bond market pullback, other non-interest income also dragged down revenue. -0.4% year-on-year in '22 and -7.9pct from January-September. The company's retail transformation continues to deepen. Retail business revenue in '22 accounted for 34.1% of total revenue, compared to +3.1pct in January-June; retail AUM at the end of '22 reached 974.9 billion yuan, +2.4% compared to the end of June; the number of retail customers at the end of '22 reached 27.53 million, up +4.3% from the end of June. Bank of Beijing Wealth Management was approved to open in November, and managed financial assets of 302.8 billion yuan at the end of '22. It is expected to open up the company's large wealth management cycle chain through business linkage in the future.
Asset quality is improving, and credit costs are declining
The non-performing rate and provision coverage rate at the end of '22 were 1.43% and 210%, compared to -16bp and +10pct at the end of September.
The attention rate at the end of '22 was -36bp to 1.61% compared to the end of June, and the hidden risk index improved. The annualized bad generation rate for 22Q4 was 0.79%, compared to Q3-0.50pct. The annualized credit cost for 22Q4 was 0.85%, -0.59pct compared to the previous year. The capital adequacy ratio at the end of '22 and the core Tier 1 capital adequacy ratio were 14.04% and 9.54% respectively, compared to -0.58pct and -0.42pct at the end of September. In 2022, the company plans to pay a dividend of 0.31 yuan per share, a cash dividend ratio of 30.52% (2021:30.03%), and a dividend rate of 6.98% (as of 2023/04/07).
Risk warning: Economic recovery fell short of expectations, and the deterioration in asset quality exceeded expectations.