Incident: The Postbank released its 2024 quarterly report. The revenue growth rate for the single quarter was 1.44% year on year, profit growth rate before provision was -6.12% year on year, net profit growth rate to mother was -1.35% year on year, and operating income achieved positive year-on-year growth, leading other major state-owned banks. Our comments are as follows:
In the first quarter of 2024, the expansion of the scale of interest-bearing assets, reduced pressure on provision planning, and falling taxes were the main factors supporting the growth of the Postbank Bank's performance. Narrowing interest spreads, rising costs, and declining net non-interest income dragged down the performance.
Volume: The scale of credit has increased steadily, and retail loans are growing at an impressive rate
① Asset side: At the end of the first quarter of 2024, the total assets of the Postbank increased 11.12% year on year, and the growth rate decreased slightly by 0.68 pct from month to month; the net increase in the single quarter was 605.3 billion yuan, of which the net value added of loans accounted for 61.90%. At the end of the first quarter of 2024, the total amount of active credit investment (excluding discounts) of the Postbank increased by 13.46% year-on-year, with a net increase of 439.2 billion yuan in a single quarter. The increase was mainly due to increased investment in public credit.
There has been steady growth in referendums. In the first quarter of 2024, the Postbank's public loans (excluding discounts) increased 18.15% year on year. Affected by the high base in the first quarter of 2023, the growth rate decreased by 2.27 pct month-on-month. There was a net increase of 268.2 billion yuan in the single quarter, an increase of 10 billion yuan over the previous year. On the public side, the Postbank has increased its investment in key areas. By the end of the first quarter of 2024, the Postbank's loan balance for inclusive small and micro enterprises was 1.58 trillion yuan, accounting for more than 18% of total loans, ranking among major state-owned banks; the balance of technology enterprise loans and green loans increased by 13.97% and about 6% respectively from the end of the previous year.
Retail loans performed well. At the end of the first quarter of 2024, Postbank's retail loan balance increased 10.18% year-on-year, with a net increase of 171 billion yuan in a single quarter, an increase of 4.6 billion yuan over the same period last year. The Postbank continued to increase credit investment in key areas of rural revitalization in the first quarter, and personal microloans achieved relatively rapid growth. As of the end of the first quarter of 2024, Postbank's agricultural loan balance was 2.33 trillion yuan, an increase of 176.234 billion yuan over the end of 2023, which was the main driver of retail loan growth.
② Debt side: At the end of the first quarter of 2024, the total size of Postbank deposits increased 10.48% year-on-year, while corporate deposits and retail deposit balances increased 1.02% and 11.67% year-on-year respectively. Guided by the concept of high-quality development, the Postbank continues to optimize the deposit business structure, and the increase in the size of personal deposits with a term of 1 year or less supports the growth of total deposits.
Price: 2024Q1 net interest spread increased slightly month-on-month, mainly benefiting from improved debt costs in the first quarter of 2024. Postbank's net interest spread was 1.92%, a decrease of 17 bps and an increase of 2 bps, respectively. We estimate that the return on interest-bearing assets of the Postbank in the first quarter of 2024 was 3.42%, a decrease of 23 bps and a decrease of 1 bps, respectively; the interest-bearing debt cost ratio was 1.52%, a decrease of 6 bps and a decrease of 3 bps, respectively. The Postbank continued to optimize the deposit structure on the debt side. The deposit interest rate at the end of the first quarter was 1.48%, down 5 bps from the end of 2023. Affected by this, the Postbank's interest-bearing debt cost ratio in the first quarter fell both month-on-month, which strongly supported the stabilization of interest spreads.
The agency insurance business dragged down revenue. The net non-interest income of Postbank in the first quarter fell 4.84% year on year, and other non-interest income, mainly investment income, increased 16.74% year on year, providing some support for net non-interest income. Net income from handling fees and commissions fell 18.21% year on year during the same period, mainly due to the sharp decline in revenue from the “integrated reporting and banking” policy in the first quarter. However, the company's investment banking, transaction banking, corporate finance and other businesses achieved relatively rapid growth in the first quarter, and sources of income are expected to expand further in the future.
The cost-to-revenue ratio increased year over year. In the first quarter of 2024, the cost and revenue ratio of Postbank was 59.32%, up 3.40 pcts year on year, dragging down the performance growth rate of 7.56 pcts. The first quarter of the Postbank's business and management fees increased 7.61% year-on-year to $53,048 billion, which is expected to be mainly due to an increase in deposit volume at Postbank agent outlets. The cost-revenue ratio of Postbank increased year-on-year in the first quarter of 2024 due to rising agency fees and declining revenue growth.
Asset quality remains stable
At the end of the first quarter of this year, the Postbank's non-performing rate was 0.84%, up 2 bps and 1 bp, respectively, and asset quality remained stable; the provision coverage rate was 326.87%, down 54.25 pct and 20.70 pct, respectively. Despite a marginal decline, risk compensation capacity was still quite sufficient.
Investment advice:
Looking ahead to 2024, Postbank's cost-to-revenue ratio is likely to remain high, and interest spreads are still under pressure.
We expect the company's revenue growth rate to be -0.31% in 2024, and the net profit growth rate to be 0.29%. We give it a buy-A investment rating. The target price for 6 months is 5.98 yuan, which is equivalent to 0.7 XPB in 2024.
Risk warning: retail transformation fell short of expectations, asset quality deteriorated sharply, macroeconomic recovery fell short of expectations, etc.