Matters:
The Bank of Beijing released its 2022 annual report. It achieved operating income of 66.3 billion yuan for the full year of 2022, which remained stable. Return to the mother's net profit was 24.8 billion yuan, up 11.4% year on year, and ROE was 9.59%, down 0.75% year on year.
Total assets at the end of the year were 3.38 trillion yuan, an increase of 10.8% over the previous year. The company's profit distribution plan for 2022 is:
A cash dividend of 3.1 yuan (tax included) was found for every 10 shares, with a dividend rate of 30.5%.
Ping An's point of view:
Revenue growth has been steady, and the middle income business continues to grow steadily. The Bank of Beijing achieved an 11.4% year-on-year increase in net profit (vs. +6.5%, 22Q3) throughout the year. We believe that the increase in profit growth was mainly due to a marginal decline in the level of provision accruals. On the revenue side, operating income remained steady throughout the year. The growth rate fell 3.2% from the third quarter. Mainly affected by the decline in net interest income, annual net interest income increased 0.1% year-on-year (vs. +1.9%, 22Q3), and the negative impact of narrowing interest spreads was significant. In terms of non-interest income, net income from processing fees maintained a steady and high upward trend. The year-on-year increase of 18.0% (vs +27.0%, 22Q3) was mainly due to the growth of agency and contract business brought about by the continuous transformation of retail strategies. The year-on-year increase for the whole year was 33.9% (vs +45.8%, 22H1). The financial redemption wave in the second half of the year affected the absolute level of growth to a certain extent, but the upward trend remained steady.
Retail investment has accelerated to improve asset pricing, and the growth rate of deposits and loans has increased month-on-month. The Bank of Beijing's annual net interest spread was 1.76%, (vs 1.77%, 22H1), and the downward trend narrowed marginally. We think it was mainly due to its asset-side improvement advantage. The annual asset-side yield was 3.85% (vs 3.87%, 22H1). In particular, the annual loan yield was 4.36% (vs 4.35%, 22H1). The annual growth rate of personal loans was 4.36% (vs 4.35%, 22H1). The annual growth rate of personal loans was 5.48% (vs 5.41%, 22H1). It reached 8.7%, which is 2% higher than the growth rate of corporate loans. The debt side continued to improve. The annual cost ratio of interest-bearing debt was 2.14% (vs. 2.17%, 22H1), mainly due to the decline in interbank debt costs. However, the negative impact of deposit regularization led to an increase in the deposit cost ratio. The annual deposit cost ratio was 2.02% (vs. 2.01%, 22H1). Term deposits increased 12.8% year-on-year throughout the year, and the growth rate was 5.8% higher than current deposit. In terms of scale, the year-on-month growth rate of deposits and loans increased significantly throughout the year. The year-on-year growth rate of deposits and loans was 12.6%/7.4%, respectively, up 1.9%/2.9% from the third quarter. Price compensation with volume relieved the downward pressure on net interest spreads to a certain extent.
The asset quality trend is improving, and risk compensation capacity remains stable. There was a clear trend of asset quality improvement throughout the year. The non-performing rate fell 16BP to 1.43% from the third quarter, mainly due to the company's gradual increase in handling large amounts of bad risk. During the reporting period, the amount of non-performing assets disposed of reached 32.5% over the previous year. Our estimate of the annual non-performing loan generation rate fell 13BP to 0.75% over the middle of the year, and the negative pressure on new students abated somewhat. In terms of forward-looking indicators, Bank of Beijing's annual attention rate was 1.61% (vs +1.97%, 22H1), and the overdue rate was 2.26% (vs 2.55%, 22H1), and marginal improvement was obvious. In terms of provision accounting, the provision coverage rate and loan ratio were 210% and 3.00%, respectively, which was +9.79% /-18BP compared to the third quarter, and the overall provision remained stable.
Investment advice: The retail transformation is beginning to bear fruit, and the asset quality trend is improving. Since its establishment, the company has been deeply involved in the Beijing region, has the capital's economy and the resource endowments of government customers, and is ranked first among financial management enterprises in Beijing. In 2022, the Bank of Beijing insisted on leading the “five major transformations” through digital transformation, established the “Digital Bank of Beijing” strategy system, and continued to deepen retail transformation. The scale of individual loans in Beijing rose to the top of the industry. It is expected that the company's future performance will continue to improve as stock risks continue to be cleared and the burden of history continues to be shaken and market demand recovered under economic recovery. Combined with the company's 2022 annual report, we raised the company's 2023 and 2024 profit forecasts, and added the 2025 forecast. The corresponding EPS was 1.29/1.44/1.58 yuan respectively (the original 23/24 forecast was 1.25/1.36 yuan respectively), and the corresponding profit growth rate was 10.3% /11.6/ 9.6% respectively (the original 23/24 forecast was 9.5%/9.0% respectively). Currently, the company's stock price corresponds to 23-25 PB of 0.4x/0.4x/0.3x, respectively. The margin of valuation safety is sufficient, and the “recommended” rating is maintained.
Risk warning: 1) The economic downturn has caused the pressure on the asset quality of the industry to rise more than expected. 2) The decline in interest rates caused industry interest spreads to narrow beyond expectations. 3) Increased cash flow pressure on housing enterprises has triggered a rise in credit risk.