Core views:
Bank of Changsha disclosed its 2023 performance report. The revenue growth rate remained flat, and the improvement in profit growth slightly exceeded expectations. 23A's revenue increased 8.5% year over year, which was basically the same as the 23Q1-3 month-on-month growth rate; net profit to mother increased 9.6% year over year, and the growth rate rebounded 0.4 PCT month-on-month. Q4 revenue and net profit to mother increased by 8.5% and 10.9% year-on-year respectively in a single quarter. The growth rates changed by +7.0 PCT and +4.5 PCT respectively compared to Q3. The weighted average return on net assets (annualized ROE) decreased slightly by 0.1 PCT to 12.5% year over year. The same high Q4 revenue growth rate was mainly due to the year-on-year base (22Q1-3's other non-interest income increased 9.1% year over year, and 22A fell to -3.0%). Q4 The growth rate of net profit to mother also rebounded sharply in a single quarter. It is expected that the quality of the company's assets will remain stable and credit costs will steadily decline.
Q4 Credit and scale growth have slowed. At the end of December, total assets and total loans increased by 12.7% and 14.6% respectively from the beginning of the year, and the increases were 0.9 PCT and 0.6 PCT respectively lower than in '22; total loans accounted for 47.9% of total assets, down 0.1 PCT from month to month, up 0.8 PCT year on year. Q4 assets expanded by 2.4 billion yuan month-on-month (VS.22q 4:261 billion yuan), added loans of 300 million yuan (VS.22q 4:22 billion yuan), total deposits at the end of December increased by 13.9% from the beginning of the year, a decrease of 0.4 PCT from the beginning of the year, and Q4 deposits increased by 262 billion yuan month-on-month (VS.22q4: increase of 242 billion yuan). The growth rate of Q4 deposits was not much different from 22Q4, but the increase in credit and asset scale declined to a large extent from 22Q4.
The defect rate has improved, and the level of provision coverage continues to rise. At the end of December 2023, the non-performing loan ratio was 1.15%, down 0.1 PCT from month to month; provision coverage remained high at 314%, up 2.9 PCT from month to month, up 3.1 PCT year on year, and 3.6% from month to month. The overall risk in the residential sector has increased, but the company's non-performing rate has improved, and its ability to offset risks continues to increase, reflecting the company's good level of risk control.
Profit forecasting and investment suggestions: Rationalize the equity structure, release retail potential, and open up room for valuation increases. The net profit growth rate for 23/24 is expected to be 9.5%/8.3%, EPS 1.78/1.93 yuan/share, respectively, BVPS is 15.06/16.76 yuan/share, respectively, the closing price corresponding to 23/24 PB is 0.5X/0.4X, respectively, and the 23/24 PE is 4.0X/3.6X, respectively. Considering that the company benefits from the active consumer market in Hunan, PB's reasonable valuation for 24 was 0.6X, corresponding to a reasonable value of 10.06 yuan/share, giving it a “buy” rating.
Risk warning: (1) The macroeconomy declined beyond expectations, and asset quality deteriorated sharply. (2) The recovery in consumption fell short of expectations, and deposit regularization was serious. (3) Market interest rates rise, and trading books lose money.