Incidents:

ICBC released its quarterly report for the year 24. 24Q1 achieved revenue of 219.843 billion yuan, -3.41% year-on-year, with a growth rate of +0.32PCT compared to 23; net profit to mother was 87.653 billion yuan, -2.78% YoY, and a growth rate of -3.58PCT compared to 23.

Non-interest support overall revenue, and provision to feed back the contribution declined

ICBC's revenue growth rate increased marginally, mainly supported by non-interest income. In 24Q1, ICBC's net transaction fee and commission revenue and other non-interest income were -2.83% and +2.15%, respectively. The growth rate was faster than the overall revenue growth rate. The net profit growth rate of ICBC's return to mother declined marginally, mainly due to a decline in provision for backfeed. In terms of performance attribution, the contribution of ICBC's net interest spread and provision to net profit in 24Q1 was -17.23% and +1.41% respectively, +1.43PCT and -3.64PCT, respectively, compared with '23.

The drag on interest spreads has weakened, and the impact of adverse factors in the early period has gradually been digested

In 24Q1, ICBC's net interest income was -4.16% year-on-year, with a growth rate of +1.18PCT in 23 years. The margin of decline in net interest income narrowed, mainly due to the weakening of interest spreads. In terms of credit investment, as of the end of 24Q1, ICBC's loan balance was 27.37 trillion yuan, +11.60% year-on-year, with a growth rate of 23 to 0.79 PCT. The decline in loan growth is mainly due to the fact that the current demand for effective financing is still weak. In 24Q1, ICBC added 1.28 trillion yuan in loans, of which 1.07 trillion yuan was added as a discount on public+ notes, accounting for 83.39% of the new loans, an increase of 79.173 billion yuan compared to 23Q1. In terms of net interest spreads, ICBC's 24Q1 net interest spread was 1.48%, compared to 23-13 BP. The marginal narrowing of net interest spreads is mainly due to asset-side drag. The average return on ICBC's interest-bearing assets in 24Q1 was 3.33%, compared to 23-12 BP. The decline in asset-side earnings is mainly due to: 1) Multiple LPR cuts in '23 led to strong repricing pressure in 24Q1. 2) ICBC's mortgage loans are large, and the impact of early mortgage interest rate adjustments still needs to be digested. By the end of '23, ICBC's share of mortgage loans had reached 24.11%. 3) Insufficient demand for effective financing has led to lower interest rates on new loans.

Stable asset quality and sufficient core capital

The overall quality of assets remains stable. As of the end of 24Q1, ICBC's non-performing rate was 1.36%, the same as at the end of 23. The balance of non-performing loans was $37,888 billion, +4.92% compared to the beginning of the period. In terms of provision, as of the end of 24Q1, ICBC's provision coverage rate was 216.31%, compared with +2.34PCT at the end of 23, and the overall risk compensation capacity was sufficient. In terms of capital, as of the end of 24Q1, ICBC's core Tier 1 capital adequacy ratio was 13.78%. The capital is very sufficient, and subsequent capital is unlikely to restrict credit investment.

Profit Forecasts, Valuations, and Ratings

Considering the current high pressure on interest spreads, we expect the company's revenue for 2024-2026 to be 8389.48, 8656.16, and 894.075 billion yuan, respectively, with year-on-year growth rates of -0.49%, +3.18%, and +3.29%, respectively, and a 3-year CAGR of 1.98%. Net profit attributable to mother was 3598.28 billion yuan, 3692.39 billion yuan, and 383.444 billion yuan respectively. The year-on-year growth rates were -1.14%, +2.62%, and +3.85%, respectively, and the 3-year CAGR was 1.75%. In view of the steady operation of the company, we maintained a target price of 6.67 yuan and maintained a “buy” rating.

Risk warning: Steady growth falls short of expectations, and asset quality deteriorates.