2023 results are in line with our expectations
Zheshang Bank announced 2023 results. The company's revenue for the 2023/4Q23 quarter increased 4.3% and 4.8% year on year, respectively, and net profit to mother increased 10.5%/10.3% year on year in 2023/4Q23, respectively. The results were in line with our expectations.
Development trends
Stock banks with high growth accelerated in 4Q. The company is deeply involved in Zhejiang and actively lays out small diversified assets such as retail, small micro, and supply chain finance to achieve rapid growth, helping total assets/loans/deposits to increase 19.9%/12.5%/11.1% year on year in 2023; the company's total assets increased 6.3% month-on-month in a single quarter, mainly due to the company increasing its bond investment allocation efforts to share the benefits brought about by declining interest rates in the bond market. In terms of pricing, the company's 2023 NIM (average balance) was 2.01%, a year-on-year decrease of 20 bps and a decrease of 13 bps from mid-year; among them, 2H23 debt costs and deposit costs were the same, with cost ratios of 2.24%/2.35%, respectively. In 2023, asset-side interest-bearing assets and loan yields (average balance) decreased by 14 bp/8 bps to 4.16%/4.87%, respectively, compared to the first half of the year. The company's net handling fee revenue in 2023/4Q23 was +1.0%/-0.4%, respectively.
The processing fee growth rate is superior to that of peers, and the customer's ability to operate in depth has improved. The company's net fee revenue for 2023/4Q23 increased by 5.2% and decreased by 9.1%, respectively, and revenue from promises and guarantees, underwriting and consulting, settlement and clearing fees increased by 9.1%/13.6%/15.5% year-on-year, respectively. We believe this is reflected in the increase in total customer service, empowered by 1+N integrated financial services and smart management, while the five major sectors are mutually empowering to achieve growth in the overall contribution of individual customers.
Investment in technology and talent costs has increased. The company's business and management expenses increased 13.8% year-on-year in 2023, mainly due to the company increasing capacity building in the two major fields of fintech and retail talent, which we believe is beneficial to ensure customer quality and operational efficiency in the medium term.
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Profit forecasting and valuation
The profit forecast for 2024 remains basically unchanged. For the first time, revenue and net profit forecasts for 2025 were introduced at 69.92 billion yuan and 19.04 billion yuan. The company's A shares are currently trading at 0.5x/0.4x 2024E/2025EP/B, and the company's H shares are currently trading at 0.3/0.3x 2024E/2025E P/B. Due to the valuation switch and risk premium adjustments, we raised the company's A share target price of 3.2% to $3.55, respectively, corresponding to 0.6x/0.5x 2024E/2025E P/B and 18.7% upward space; increase the target price for H shares by 4.9% to HK$2.77, corresponding to 0.4x/0.4x 2024E/2025E P/B and 21.0% upward space. Maintaining the company's A/H shares outperforming the industry rating.
risks
Risks in urban investment and real estate continue to ferment, and macroeconomic recovery falls short of expectations.