Introduction to this report:
The 2023Q3 revenue growth rate of the Bank of Xiamen was slightly lower than expected. Profits were released at a high level, the size of deposits and loans resumed growth, and asset quality was stable. Maintain the target price of 6.16 yuan and maintain an increase in holdings rating.
Key points of investment:
The investment proposal adjusts Bank of Xiamen's 2023-2025 net profit growth forecast to 13.8%, 6.8%, and 10.4%, corresponding to EPS 1.03 (-0.02), 1.06 (-0.15), 1.18 (-0.22) yuan/share, and BVPS of 9.09 (+0.04), 9.84 (-0.12), and 10.69 (-0.31) yuan/share, based on the performance of the first three quarters, expansion, and the trend that interest spreads will still narrow for some time to come. Maintain the target price of 6.16 yuan, corresponding to 0.68 times PB in 2023, and maintain an increase in holdings rating.
The year-on-year decline in 23Q3 revenue slightly exceeded expectations, and fewer impairments supported steady profit growth. Q3 Revenue fell 16.3% year over year, with interest and non-interest both being a negative drag. In terms of interest income, the scale expanded slowly. The quarterly net interest spread fell 7 bps month-on-month, and the year-on-year decline increased to 14 bps; on the non-interest side, handling fee income continued to decline, and net other non-interest income was affected by exchange rate fluctuations and reduced investment income, and the year-on-year decline was close to half. Under pressure on revenue, banks relied on credit impairment measures to reduce 86.9% year over year, supporting an 11.8% year-on-year increase in profit, maintaining a double-digit growth rate due to steady asset quality and adequate provision planning.
The size of deposits and loans resumed growth in 23Q3. Deposits ended four consecutive quarters of decline in size, up 6.3% from the end of Q2; loans filled the Q2 decline gap, but only increased 2.4 billion yuan in the first three quarters, significantly lower than the 15.2 billion yuan in the same period last year, and effective credit demand continued to be sluggish.
Asset quality remained stable, and the attention rate fluctuated slightly but achieved a double drop. The provision coverage rate fell slightly by 2 pct to 393% from the end of Q2, and remained at a high level.
Risk warning: Demand repair falls short of expectations.