The Bank of Qingdao released its 2024 quarterly report. Our comments are as follows: 24Q1 revenue, PPOP, and net profit to mother grew by 19.3%, 24.6%, and 18.7%, respectively. The growth rates changed by +12.2pct, +17.3pct, and +3.6pct respectively from 23A, and the performance growth exceeded expectations. In terms of performance drivers, the expansion of scale and the decline in other income and expenditure, and cost-to-revenue ratios formed a major positive contribution. The narrowing of net interest spreads and effective tax rate factors contributed to a certain extent.
Highlights: (1) Accelerating the expansion of credit scale. On the asset side, the company actively increased loan investment and optimized the interest-bearing asset structure. 24Q1 loans increased 12.0% year on year, up 0.5 pct from year 23, and added 17 billion yuan in loans, an increase of 2.8 billion yuan over the previous year. The size of investment assets and interbank assets decreased, and the share of interest-bearing assets at the end of 24Q1 increased 1.6 pct to 52.7%. On the debt side, 24Q1 interest-bearing debt increased 12.4% year on year, down from 23, but it is still high. Among them, deposits increased 9.1% year on year, and the growth rate declined significantly, indicating that competitive pressure on Q1 deposits may increase, and the growth rate of active debt remained high, and the share increased markedly. (2) Net revenue from handling fees increased by 11.8%, and other non-interest income increased significantly. The company's 24Q1 performance exceeded expectations, and the high increase in non-interest revenue contributed as a major contribution.
24Q1's non-interest revenue increased 47.7% year on year. Among them, 24Q1's net income from fees and commissions bucked the trend. The main source of the company's handling fee revenue was financial management fees, accounting for more than 40% in 23 years, followed by agency business revenue and escrow business revenue, which accounted for 26% and 18% respectively. Considering the impact of fee cuts on consignment products and the “wave of redemption procedures” in financial management during the same period last year, it is expected that the contrarian increase in the company's net fee revenue will be mainly driven by a recovery in financial management. Other non-interest rates increased 88% year over year in 24Q1. The main contribution came from profit and loss from changes in fair value of financial investments.
Concern: (1) Interest spreads have narrowed. The company's 24Q1 net interest spread was 1.77%, down 5 bps from 23A.
On a marginal basis, we estimate that the yield on 24Q1 interest-bearing assets fell 10 bps from 23Q4, and is expected to be affected by multiple factors such as stock loan repricing and a downward shift in market interest rates; we estimate that the 24Q1 interest-bearing debt cost ratio will drop 4 bps compared to 23Q4, and the effects of the company strengthening debt cost control and optimizing the debt structure will continue to show. (2) Increased defect generation rate. The non-performing loan ratio at the end of 24Q1 was 1.18%, the same as 23A; the attention rate was 0.49%, down 5 bps from 23A; the estimated net bad generation rate of 24Q1 was 1.22%, up 0.65pct from 23A, focusing on subsequent risk exposure; the provision coverage rate was 232.35%, an increase of 6.39 pct compared to 23A, further strengthening risk offsetting capacity.
Profit forecast and investment advice: The net profit growth rate of the company in 24/25 is expected to be 11.3%/8.7%, EPS is 0.64/0.70 yuan/share, respectively. The current stock price corresponds to the 24/25 PE of 5.44X/4.98X, respectively, and the 24/25 PB is 0.57X/0.52X, respectively. Taking into account the company's historical PB (LF) valuation center and fundamentals, maintaining the company's reasonable value of 4.92 yuan per share, corresponding to the 24-year PB valuation of about 0.8X, according to the current AH premium As a ratio, H shares have a reasonable value of HK$3.21 per share, all with a “buy” rating.
Risk warning: (1) the quality of retail assets deteriorated due to a decline in economic growth exceeding expectations; (2) deposit costs rose more than expected; (3) policy regulation exceeded expectations.