Bank of Beijing's first-quarter results increased 1.9% year over year. First-quarter revenue fell 6.9% year over year, mainly due to provision, scale, and other non-interest income. The highlights of the quarterly report are: First, the decline in net interest income was narrower than in the fourth quarter, and scale growth accelerated. The month-on-month decline in interest spreads in the first quarter was better than expected, and looking at interest income month-on-month, it was better than last year. Second, investment-related non-interest income increased by 45.7%, showing a positive contribution to revenue. Third, asset quality continues to improve, and loan provisions are stable. According to the annual report, the company's total allocations/total assets are at the forefront of urban commercial banks. Non-loan provisions are more fully calculated, and overall risk defense capabilities may be better than loan provisions.
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 PB0.39X, and the 22-year dividend rate is 6.54%. The valuation is far below value. I am optimistic and maintain the company's shareholding growth rating.
Key points to support ratings
The narrowing of interest spreads in the first quarter was better than expected
The Bank of Beijing's net interest spread for the first quarter was estimated at 1.62% in a single quarter, a decrease of 5 bps over the previous quarter. The estimated return on interest-bearing assets was 3.75%, a decrease of 2 bps over the previous month, and the estimated cost ratio of interest-bearing debt was 2.16%, an increase of 1 bp over the previous month.
Moreover, net interest income and interest income increased by 0.86% and 3.7% month-on-month, better than last year.
Accelerating scale growth
At the end of the first quarter, the total assets of the Bank of Beijing increased 11.5% year on year, loans increased 8.6% year on year, and growth rates increased 0.8 and 1.2 percentage points respectively over 2022. Deposits increased 8.4% year over year, and the growth rate fell 2.6 percentage points from the previous quarter.
Asset quality continues to improve, making provision to feed back profits
The non-performing rate in the first quarter was 1.36%, down 7 bps from the previous quarter; the non-performing balance was 25.82 billion yuan, a slight increase of 0.5% over the previous quarter, and asset quality continued to improve. Asset impairment losses fell 37.9% year-on-year in the first quarter, making provision for less contribution to performance. The provision coverage rate was 217.01%, an increase of 7 percentage points over the previous quarter. The financing ratio was 2.95%, a decrease of 5 bps from the previous quarter. According to the annual report, the company's total allocations/total assets are at the forefront of urban commercial banks. The non-loan provisions are quite adequate, and the overall risk defense capability may be better than loans.
According to the company announcement, we adjusted the company's profit forecast and adjusted the EPS from 2023 to 2025 to 1.08/1.21/1.40 yuan. The current stock price corresponds to the 2023/2024 PB of 0.39x/0.35x, maintaining the shareholding increase rating.
The main risks faced by ratings
Asset quality deteriorated beyond expectations due to economic downturn and overseas fluctuations.