Revenue and net profit both fell, the stock price plummeted, and the president of Everbright Bank responded quickly

On March 28, the A-share and H-share prices of Everbright Bank both plummeted, and as of the close, Everbright Bank's A-shares fell 7.14%, and Hong Kong-listed China Everbright Bank fell more than 12%. On the news side, the 2023 annual report released by Everbright Bank on the evening of March 27 shows that last year, the bank's operating income was 145.668 billion yuan, down 3.92% year-on-year, the net profit attributable to shareholders of the bank was 40.792 billion yuan, down 8.96% from the previous year, and the non-performing loan ratio remained unchanged for three years at 1.25%.

The stock prices of Everbright Bank's A-shares and H-shares both plummeted

On the evening of March 27, after Everbright Bank disclosed its 2023 annual results, Everbright Bank's Hong Kong stocks and A-shares fell sharply on the 28th. A-shares fell to the lowest point of the day at around 10 a.m. at 3.05 yuan per share, down 9.23%, while Hong Kong stocks fell to the lowest point of the day at HK$2.23 per share, down 13.57%.

The reporter of Nandu Bay Finance Society noticed that it is currently in the 2023 annual earnings season, and many stocks in the banking sector have recently released their annual reports. In the case of the overall upward trend of the market index on the 28th, Hong Kong stocks and A-share banking sectors performed poorly, and many banks generally fell after the opening, with Bank of Communications and Agricultural Bank of China falling more than 2%, and Industrial and Commercial Bank of China, Bank of China, China Construction Bank, Industrial Bank, etc. all falling more than 1%.

In the banking sector, Everbright Bank was the top decliner, and there was a large gap with other bank stocks, which attracted market attention. In this regard, Wang Zhiheng, President of Everbright Bank, responded urgently at the bank's 2023 results conference on the 28th: "Seeing some feedback from the capital market on Everbright Bank, our fundamentals are stable, and there are no major risk events that should be disclosed but not disclosed. ”

Revenue and net profit both declined!, the governor responded

In 2023, CEB achieved a net profit of RMB41.076 billion, down 8.8% year-on-year, net interest income of RMB107.480 billion, down 5.43% year-on-year, and net fee and commission income of RMB23.698 billion, down 11.39% year-on-year.

In this regard, Everbright Bank explained that the main reason is that the group has strengthened the provision in order to consolidate the foundation of asset quality control, and the provision for asset impairment loss increased by 2.96% year-on-year.

In terms of business scale, the total assets and liabilities have "doubled" for two consecutive years. Among them, the total assets were 6,772.796 billion yuan, and the total liabilities were 6,218.011 billion yuan, up 7.5% and 7.38% year-on-year;

The total principal amount of loans and advances was 3,786.954 billion yuan, an increase of 214.678 billion yuan or 6.01 percent over the end of the previous year. Among them, loans in the fields of inclusive finance, green, manufacturing, strategic emerging industries, science and technology enterprises, and private enterprises all increased, and the balance of deposits was 4,094.528 billion yuan, an increase of 177.360 billion yuan or 4.53 percent over the end of the previous year.

In terms of asset quality, the balance of non-performing loans was RMB47.476 billion, an increase of RMB2.802 billion from the end of the previous year, the non-performing loan ratio was 1.25%, unchanged for three consecutive years, and the provision coverage ratio was 181.27%, down 6.66 percentage points from the end of the previous year.

At the 2023 annual results conference of Everbright Bank held on March 28, Wang Zhiheng, President of Everbright Bank, said that in 2023, due to the decline in loan income and investment income, the policy of fee reduction and interest concession, and the downturn in the capital market, the overall net interest income and net fee income have declined, so the revenue of Everbright Bank will decline slightly by 3.92% in 2023, which is in line with the trend of its peers as a whole.

Regarding the decline in net profit, Wang Zhiheng further explained in his response that in the case of an overall decline of 3.92% in revenue, the main factor for the 8.96% decline in net profit attributable to the parent company was the increase in credit impairment provisions by 1.677 billion yuan.

"In the face of declining revenue, (China Everbright Bank) has increased its provisions, especially in the fourth quarter of last year, in order to consolidate the foundation of asset quality, and at the same time, it is also a strict implementation of the new risk classification regulations of supervision. At the same time, CEB has further strengthened the disposal of stock risks. These measures do have a certain impact on short-term profitability, but they are a more fundamental guarantee for long-term profitability."

The performance is significantly lower than expected, which is likely to drag down the stock price

The market is also concerned about the dividend ratio of bank stocks

The reporter of Nandu Bay Finance Society observed that from the past situation of listed companies in the banking industry, it is relatively rare for stock prices to fluctuate significantly after the release of annual financial reports, but there are some precedents.

For example, in the 2021 annual report season, the stock prices of a number of A-share listed banks fell significantly after the announcement of their annual report results, among which Bank of Nanjing, Postal Savings Bank, Bank of Guiyang and Bank of Changsha fell by 7.47%, 6.78%, 5.95% and 5.87% respectively on the trading days after the announcement of their annual reports or quarterly reports.

On the whole, the above-mentioned banks with large declines mainly exposed in their financial reports such as the decline in overall revenue and profit growth, the decline in signboard business, and the obvious decline in investment profits and losses. In the capital market, if the overall performance of the company's financial report is significantly lower than the expected level of most brokerage research reports, or the exposure of some risk factors increases, it will often cause downward pressure on the company's stock price.

Judging from the previous research reports of brokerages on Everbright Bank, many research reports have predicted that the bank's net profit attributable to the parent company will increase year-on-year in 2023. For example, Kaiyuan Securities predicts that its net profit attributable to the parent in 2023 will reach 45.9 billion yuan, a year-on-year increase of 2.53%, but in fact, the net profit attributable to the parent of Everbright Bank in 2023 will decrease by 8.96% year-on-year, which is more than 10% different from the forecast of Kaiyuan Securities, which can be said to be significantly lower than expected.

In addition, some brokerage banking analysts pointed out that compared with the performance of the same industry that has released its 2023 financial report and dividend plan, the dividend of Everbright Bank this year is also slightly behind, with a dividend ratio of 25.06%, while the dividend ratio of large state-owned banks is basically above 30%. This, combined with negative profit growth, could be the reason for the volatility in the bank's share price.

It is worth noting that a number of brokerages have pointed out that in the short term, the banking sector is more favored by market funds for its high dividend characteristics: listed banks have never had big ups and downs in dividends, and the certainty of earning dividends is more obvious, and the dividend rate of many bank stocks has also increased in recent years. This also means that the dividend rate announced in the annual report is also an important indicator for evaluating the value of bank stocks in the current capital market.

Written by: Nandu Bay Finance Society reporter Ma Qing Xu Jincong