Bank of Communications (601328): continuous improvement of asset quality
Key investment points: Bank of Communications released the first quarter report of 2024, and 24Q1 revenue decreased by 0.03% year on year, parent net profit increased by 1.44% year on year, non-performing ratio declined month on month, core tier one capital adequacy ratio continued to improve, and the company's "better than the big city" rating was maintained.
Profitability remained stable. Bank of Communications's 24Q1 revenue was -0.03% year on year, and the net profit attributable to the parent company was+1.44% year on year.
The annualized average return on assets and annualized weighted average return on net assets were 0.71% and 10.79%, respectively.
24Q1 core tier one capital adequacy ratio rose 21 bp month on month to 10.44%, maintaining an upward trend from 23Q2.
Continuous improvement of asset quality. In 24Q1, the non-performing rate decreased by 1bp to 1.32% month on month, and the provision coverage rate increased by 1.84pct to 197.05% month on month. Among them, the non-performing ratio of corporate loans decreased by 7bp to 1.58% month on month. The company continues to monitor the focus and trend of risk situation, strengthen risk identification, improve accurate measurement, maintain the strength of loan provision, and have sufficient risk resistance and loss absorption capacity.
The credit supply grew steadily and the deposit structure was optimized. 24Q1 Total assets are+1.3%, loans+3.1% and deposits+1.5% compared with the end of 2023. Demand deposits accounted for 34.41%, up 8 bp month on month. The company increased credit supply in the fields of inclusive microenterprises, manufacturing, strategic emerging industries, green, agriculture and so on to achieve a reasonable growth in the total amount and structural adjustment and optimization.
Investment advice. We predict that the EPS will be RMB 1.16, 1.20 and 1.25 from 2024 to 2026, and the growth rate of net profit attributable to the parent company will be 0.95%, 3.10% and 3.68%. According to the DDM model (see Table 2), the reasonable value is 7.73 yuan; According to the PB-ROE model, the 2024E PB of the company was valued at 0.60 times (0.56 times for comparable companies), and the corresponding reasonable value was 7.85 yuan. Therefore, the reasonable value range is 7.73-7.85 yuan (corresponding to 6.66-6.77 times of PE in 2024, and 5.59 times of PE for peer companies), and the rating of "better than the big market" is maintained.
Risk tip: the solvency of enterprises declines, and asset quality deteriorates significantly; Significant changes have taken place in financial regulatory policies.
