Key investment points: CMB's net interest spread is stable, and it still maintains a high proportion of current accounts under the trend of deposit regularization. While achieving endogenous capital growth, it provides stable returns to shareholders. The dividend ratio stabilized at 33%, and the core Tier 1 capital adequacy ratio reached 13.68%, up 0.83 pct from 22Q3. We maintain an superior market rating.
Net interest spreads are stable, the yield on public loans is the same, and interest rates on small and micro loans are high. CMB's net interest spread in '22 was 2.40%, a slight decrease of 1 bps from 22Q1-Q3; 22Q4's net interest spread for a single quarter was 2.37%, up 1 bp from 22Q3.
The average yield on public loans in '22 was 3.85%, the same as 22H1, and slightly higher than the full year of '21. We think CMB focused on the economic benefits of public loans and did not expand blindly. The average yield of short-term loans is 4.81%, which is higher than the yield of medium- to long-term loans of 43 bps, mainly because credit cards with higher interest rates and small and micro loans account for a relatively high share of short-term loans. The average interest rate for newly issued inclusive small and micro enterprise loans is 5.15%, which is higher than the average interest rate for corporate loans.
Current accounts still account for more than 60% of personal savings accounts. Among personal loans, the average balance of current accounts for 64%. Maintaining a high level under the trend of deposit regularization is conducive to maintaining the net interest spread advantage.
The increase in agency insurance revenue partially offsets the impact of the decline in agency fund revenue. Other non-interest income is stable and not greatly affected by fluctuations in the bond market. Corporate agency insurance revenue increased 51% year over year in '22, mainly due to rising demand for customer protection. Other non-interest income fell 1.87% year over year, not a significant decline. The company had 184 million retail customers at the end of '22, an increase of 6.36% over the previous year. Among them, the number of customers with Golden Sunflower and above increased 12.84% year-on-year compared to '21.
Retail loan companies start with low-threshold products such as “Chao Chao Bao” and “Chao Chao Ying No. 2” to drive users' investment demand to continue to advance; they focus on customer financial management experiences, focusing on stable wealth management products, accounting for more than 70% of the supply of prudent wealth management products throughout the year.
Seize market opportunities such as medium- to long-term investment in manufacturing, green and low-carbon industrial transformation, infrastructure construction, and scientific and technological innovation development. The balance of green loans increased by 34.69% from the end of '21; manufacturing loans increased 38.68% from the end of '21, of which medium- to long-term loans increased by 54.81%; loans to technology enterprises increased by 44.86% from the end of '21.
Investment advice. We forecast EPS of 6.23, 7.08, and 7.93 yuan in 2023-2025, and net profit growth rates of 15.11%, 13.43%, and 11.85%. We obtained a reasonable value of 41.06 yuan based on the DDM model (see Table 2); according to the comparable valuation method, the 2023E PB valuation for the company was 1.10 times (0.44 times for comparable companies), and the corresponding reasonable value was 40.93 yuan. Therefore, a reasonable value range of 40.93-41.06 yuan (corresponding to 2023 PE is 6.57-6.59 times, corresponding PE for interbank companies is 4.00 times), maintaining the “superior market” rating.
Risk warning: The solvency of enterprises has declined, and asset quality has deteriorated drastically; major changes have occurred in financial supervision policies.