Bank of Beijing's 2022 performance increased 11.4% year on year, and performance growth accelerated markedly. Revenue growth in 2022 remained flat year on year. Revenue was under pressure in the fourth quarter. The pandemic and bond markets impacted interest income and non-interest income. Asset quality improved markedly in the fourth quarter, and provision was made to reduce profits. Highlights of the company's annual report stand out: First, asset quality has improved dramatically, all indicators have improved, and inventory risks have continued to be clarified. Second, retail transformation has achieved remarkable results. Retail deposits have grown rapidly, retail consumer loans have grown rapidly, and support for scale has increased. Third, the public loan structure has also been optimized. Last year, investments were mainly in infrastructure, manufacturing, technology, etc. The company's strategic transformation is firm, execution is active, and results are remarkable. As inventory risks are cleared, retail and digital transformation results may gradually improve the company's financial performance. Currently, the company's 23-year PB0.36X, and the 22-year dividend rate is 6.98%. The valuation is far below value. I am optimistic and maintain the company's shareholding growth rating.
Key points to support ratings
Retail transformation has achieved remarkable results
Retail loans and retail deposits are growing rapidly, and the share of retail business continues to rise. Savings deposits increased 21.7% year over year, while retail consumer loans and retail operating loans increased 42.8% and 17.4%, respectively. At the end of 2022, retail revenue accounted for 34.1%, an increase of 6 percentage points over the previous year; retail AUM reached 974.94 billion yuan, an increase of 10.23% over the beginning of the year; and the scale of individual loans in Beijing rose to the top of the industry.
Scale growth accelerated, retail consumer loans grew rapidly, and the structure of public loans continued to be optimized. Total assets in 2022 increased 10.8% year on year, loans increased 7.4% year on year, and growth rates increased 6.6 percentage points and 2.6 percentage points respectively from the growth rate in the 3rd quarter. Looking at the whole year, 51% of the new loans came from non-mortgage retail loans. Retail consumer loans and operating loans increased by 63.5 billion yuan, of which retail consumer loans increased by 40.2 billion yuan and retail operating loans increased 23.3 billion yuan, up 42.8% and 17.4% respectively. Among public loans, infrastructure transportation, electricity and water resources accounted for 25% of the increase, manufacturing increased by 19%, technology by 10%, real estate and leasing and business services industries declined, and the overall loan structure was optimized.
Defects, concerns, and overdue declined sharply from the medium term. Asset quality improved significantly from the medium term to the non-performing rate of 1.43% at the end of 2022, down 16 bps from the previous quarter; the balance of non-performing loans was 25.7 billion yuan, down 7.8% from the previous quarter, and both non-performing loans fell 7.8% from the previous quarter. Interest loans accounted for 1.61%, down 36 bps from the medium term, and overdue loans by 2.26%, down 29 bps from the medium term. The company wrote off 9.9 billion yuan in 2022, a decrease of 5.5 billion yuan from last year, and the high level of write-off efforts has slowed slightly.
The estimated bad generation rate was 0.75%, a decrease of 27 bps over the previous year. There was a marginal decline in adverse pressure added. Overdue for less than 90 days increased 17% compared to the medium term, and the growth rate slowed down. The normal loan migration rate was 1.54%, a sharp drop from the medium term.
According to the company's annual report, we adjusted the company's profit forecast. The 2023/2024 EPS was adjusted to 1.26/1.41 yuan. The current stock price corresponds to the 2023/2024 PB of 0.36x/0.33x, maintaining the shareholding increase rating.
The main risks faced by ratings
Asset quality deteriorated beyond expectations due to economic downturn and overseas fluctuations.