CCB's revenue and profit fell into the year-on-year decline range one after another.
Following the valuation in 2023, the market of the six major state-owned banks will continue to dance in 2024 with excellent dividends and solid performance.
Although it is generally red, it can still be distinguished from high and low in comparison.
Unexpectedly, at the end of the competition for the time being, it was China Construction Bank (601939.SH).
As of the close of trading on May 7, 2024, the Agricultural Bank of China and the Bank of Communications have risen brightly during the year; CCB's rise was less than 10%, which was relatively bleak. From the perspective of valuation multiples, CCB's rolling price-to-earnings ratio of 5.38 times is not high, ranking second to last among the six major banks.
With a market value of nearly 2 trillion yuan, has China Construction Bank temporarily lost the favor of the market?
Revenue and profit have stalled
On March 29 and April 30, CCB announced its 2023 annual report and 2024 first quarter report. The two financial reports reflect that the company's revenue and profit fell into the year-on-year decline range one after another.
First of all, the revenue declined - the 2023 annual report shows that CCB will achieve revenue of 769.736 billion yuan in 2023, a year-on-year decrease of 1.79%, and the decline rate is 0.52 percentage points higher than that of the first three quarters, and the net profit attributable to the parent company recorded 332.653 billion yuan, a year-on-year increase of 2.44%, but the growth rate is also 0.67 percentage points lower than that of the first three quarters. According to the analysis of the research report of Guolian Securities on March 31, although the loan balance increased by 12.59% for the whole year from the perspective of credit delivery, the loan yield was 3.82%, down 12 basis points from the first half of 2023. In the end, it is difficult to offset the price reduction due to the increase in volume.
In the first quarter of 2024, CCB's revenue was 200.928 billion yuan, a year-on-year decrease of 2.97%, and the decline continued to increase compared with the 2023 annual report; The net profit attributable to the parent company was 86.817 billion yuan, a year-on-year decrease of 2.17%.
From the perspective of the industry, the setback in the first quarter is also a common problem encountered by the six major banks. In particular, the revenue and net profit of the four companies of industry, agriculture, China and construction all "declined", and the decline in interest margins was also more than 20 basis points.
A closer look at the assets and liabilities reveals more operational details.
In 2023, CCB's assets increased by 10.76% year-on-year, and liabilities increased by 10.81% year-on-year. In this way, the growth rate of total liabilities is higher than the growth rate of total assets, indicating that liabilities still have the ability to support asset expansion.
Refined to the two ends of deposits and loans, the growth rate of the two is reversed. In 2023, CCB's loans increased by 12.6% year-on-year, of which the growth rate of corporate loans was significantly higher than that of personal loans, which increased by 18.4% and 5.3% year-on-year, respectively. The year-on-year growth rate of deposits remained at a high level of 12.3%, but unlike the growth structure of loans, the contribution of personal deposits increased, reflecting the common industry trend of increasing residents' willingness to save and increasing regularization.
The pressure to chase and follow is also net interest margin. It is worth affirming that in recent years, CCB has the strongest net interest margin among the four major banks of China, agriculture, industry and construction, but it has also fallen to 1.70% in the 2023 annual report and 1.57 in the first quarter of 2024, and the situation of profitability erosion is severe.
CCB also realized that the challenge of low interest margins would be a marathon. On April 2, at the results conference held simultaneously in Beijing and Hong Kong of China Construction Bank, Zhang Jinliang, chairman of the board of directors, said that the bank will optimize its asset structure in the future, so as to achieve "increase and decrease, take and take", and strive to maintain the leading level of net interest margin in the industry by continuously reducing the proportion of inefficient assets.
Major mortgage banks should deal with prepayment
Among the large state-owned banks, CCB has a significant feature - the balance of personal housing loans is relatively high. Therefore, this change in its indicators directly affects the bank's performance, and it is also an important window for the market to observe consumers' willingness to take out mortgages.
At the end of 2023, CCB's "personal housing loan" balance was 6.39 trillion yuan, slightly higher than ICBC's 6.29 trillion yuan, and much higher than Agricultural Bank of China and Bank of China's 5.17 trillion yuan and 4.79 trillion yuan.
This is a significant plus for CCB. Because the asset quality of China's personal housing loans is generally very good, the non-performing ratio has remained low at only 0.3% for a long time. The "Securities Star" report also pointed out that historical experience shows that the quality of China's personal housing loans is closely related to employment and income, and is less affected by housing price fluctuations.
However, from mid-2023, CCB's personal housing loans began to shrink. The balance of 6.39 trillion yuan in 2023 has fallen by about 1.44% compared with the same period in 2022. But fortunately, from the perspective of the change ratio, the year-on-year decline of -1.44% is the smallest among the four major banks of industry, agriculture, China and construction.
At CCB's results conference, a reporter asked how CCB's current mortgage demand and prepayment situation have changed. In this regard, Vice President Li Yun revealed that in the first quarter of 2024, the scale of CCB's prepayment of housing loans has decreased quarter-on-quarter. Li Yun said that the reduction in the interest rate of existing mortgages in 2023 will reduce the mortgage expenditure of customers, which will help alleviate the willingness to repay the house early.
There are two other areas to watch in terms of asset quality.
First, among the four major state-owned banks, CCB has the highest non-performing loan ratio. CCB's non-performing loan ratio remained at 1.37% at the end of 2023, higher than the 1.36%, 1.33% and 1.27% of ICBC, ABC and BOC. In the first quarter of 2024, CCB's non-performing loan ratio fell slightly to 1.36%, but it is still the highest among major state-owned banks, along with ICBC.
Looking at the five-level classification, the proportion of "loss" loans will double in 2023, the "doubtful" and "concern" categories will be basically flat, and the "subordinated" category will decline.
Second, in terms of provisions, CCB is the only one of the four major state-owned banks to see a decline in its provision coverage ratio in 2023. In 2023, CCB's provision coverage ratio will be 239.85%, a decrease of 1.68 percentage points from the previous year. The loan-to-provision ratio was 3.28%, down 5 basis points from 3.33% in the third quarter.
According to a research report published by Caixin Securities on April 22, CCB's risk offset ability remains at the forefront of its peers. In 2023, the impairment loss decreased by 17.78 billion yuan year-on-year, mainly due to financial investment and off-balance sheet asset backhing. In addition, the loss of loan impairment also shows that CCB maintains a prudent and strict impairment provision policy.
Guolian Securities' research report published on March 31 has a slightly different view. The report pointed out that CCB's attention rate and overdue rate in 2023 will be 2.44% and 1.12%, respectively, down 6 and 2 basis points from the middle of the year. Objectively, the public credit is invested in the head enterprises with better customer qualifications; Subjectively, CCB's NPL determination margin was slightly relaxed. As of the end of 2023, the deviation rate of non-performing loans overdue for more than 90 days was 56.03%, an increase of 5.50 percentage points from the middle of the year.
The market generally believes that although the provision coverage ratio and loan-to-provision ratio decreased year-on-year, they still maintained a good level in the banking industry, and the overall loan quality of CCB was controllable.
Wealth management, consumer finance and other businesses are under pressure
In terms of mid-income performance, the performance of CCB's wealth management business dragged down. For the whole year of 2023, CCB's net fee and commission income decreased by 0.29% year-on-year, a decrease of 0.33 percentage points from the first three quarters. The fee income of wealth management business was 10.680 billion yuan. The analysis of the financial report of Guolian Securities pointed out that from the perspective of the overall environment, the performance of the capital market in 2023 will be weak, which will lead to a decline in the scale of CCB's wealth management products.
The data is intuitive. At the end of 2023, CCB's wealth management products will be 1.58 trillion yuan, a significant decrease of more than 20% year-on-year compared with 2.01 trillion yuan in 2022.
After comparing the overall performance of bank wealth management subsidiaries in 2023, Zhongxin Jingwei found that the net profit of the 21 wealth management subsidiaries included in the statistics decreased by 24% year-on-year; The net profit of five wealth management subsidiaries such as CCB Wealth Management has been "cut in half", and the decline is significantly greater than that of its peers.
There is still a long way to go for the wealth management subsidiaries of banks to cope with the future. In addition to breaking the "rigid exchange" and the fluctuation of the capital market to stir the sensitive nerves of customers, with the progress and opening of the financial market, bank wealth management is also facing challenges from other financial institutions such as fund companies.
CCB's other non-interest performance is remarkable. According to a research report published by Caixin Securities on April 18, CCB's other non-interest income will record 36.757 billion yuan in 2023, an increase of 12.751 billion yuan or 53.12% from the previous year.
Investment income played a driving role, which was 16.887 billion yuan, an increase of 2.244 billion yuan from 2022. Under the influence of fluctuations in the foreign exchange market, the foreign exchange gain recorded 3.247 billion yuan, also a significant increase of 2.752 billion yuan over the previous year, and the change in fair value narrowed significantly, with a loss of 3.615 billion yuan, a decrease of 8.807 billion yuan from the previous year.
The above-mentioned Guolian Securities research report also saw a breakthrough in the AUM (assets under management) of CCB's private bank. As of the end of 2023, CCB's personal AUM and private bank AUM reached 18.50 trillion yuan and 2.52 trillion yuan, respectively, with a year-on-year growth rate of 8.82% and 12.00%, representing a double-digit growth rate for high-net-worth customers.
Although the absolute contribution of the consumer finance business to the performance is not high, it is still worth paying attention to given that it is still one of the key areas of the national economy and people's livelihood that CCB is deeply engaged in.
Tianyancha data shows that CCB Consumer Finance Co., Ltd. was established in 2023 with a registered capital of 7.2 billion yuan, and is held by China Construction Bank, Beijing State-owned Assets and Wangfujing Group Co., Ltd. to operate personal small consumer loan business. According to the financial report, as of the end of 2023, the total assets of CCB Consumer Finance in the first year of its establishment reached 7.308 billion yuan, and the net loss for the whole year was 65 million yuan.
In terms of corporate governance, since 2024, CCB has received continuous news of fines, which has aroused the market's attention to its corporate governance and compliance, and is also a wake-up call that often rings in the ears. According to a number of media reports such as the Financial Associated Press, on April 30, 2024, the official website of the State Administration of Financial Supervision disclosed a fine that the then president of the Chengxi branch of China Construction Bank was banned for 5 years for "relaxing credit management, resulting in the loss of credit funds". This case has also become another typical example of the abuse of lending power by the branch president.
According to the inventory of "Discovery.com", in 2023, CCB will be the largest state-owned bank to be fined. According to the media inventory, in the first quarter of 2024, CCB or its branches issued a total of 16 fines, with a total amount of 8.7345 million yuan, and the reasons for the penalties include "inadequate management of mortgage quick loan business" for Suzhou Branch and "inflated deposit and loan scale" for Anyang Branch.
Dividend style and high-quality development can be expected
Based on comprehensive analysis, the market still has considerable confidence in CCB.
It is not difficult to see that whether it is the fluctuation of the asset side, the pressure on interest margins or the challenges faced by the wealth management business, most of them are common problems faced by the entire banking industry.
For example, in the business of wealth management subsidiaries, the performance of joint-stock banks such as SPDB, Huaxia and Ping An is generally better than that of large state-owned banks such as CCB. Digging out the reasons behind it, He Yurui, a researcher at Puyi Standard, once analyzed to the media that the wealth management sales of large state-owned banks rely more on their own channels and customer resources, and the customer base is dominated by middle-aged and elderly customers with lower risk appetite.
In this regard, CCB can try to focus on the agency sales of its parent bank in the wealth management business, continue to develop sales structures such as inter-bank agency sales and direct sales as a supplement, and deepen the coverage and understanding of customer service, so as to regain the growth rate of the business, cope with the competition of joint-stock banks and other competitors in the same industry, and gain advantages in the competition with more financial institutions.
As one of the major state-owned banks, CCB's outstanding dividend style is attracting investors with real money. In 2023, the annual dividends of CCB and ICBC will both reach 100 billion yuan. Among them, ICBC won the "Dividend King" with a dividend of 109.203 billion yuan, and China Construction Bank paid a dividend of 100.004 billion yuan, ranking second.
In the context of the new policies and regulations to encourage listed companies to pay dividends, CCB is also taking the lead in further enhancing investors' sense of gain. According to a number of media reports such as People's Daily Online, five major state-owned banks, including China Construction Bank, have recently announced that they will implement interim dividends in 2024 and continue to polish their dividend style attributes. Sheng Liurong, chief financial officer of China Construction Bank, also revealed at the results conference that the bank is studying multiple dividend plans, and will steadily advance after comprehensively considering various factors such as shareholders' wishes, capital situation, regulatory requirements, and company development.
Some institutions have voiced that in the current environment, the market should pay attention to the comprehensive quality development of CCB. In the research report, DBS pointed out that CCB is now focusing on the quality of growth, rather than just seeking scale expansion. The agency reaffirmed CCB's "buy" rating and also forecasted CCB's dividend yield of about 9% this year, the highest among the big four banks.
According to the latest research report released by Guolian Securities on May 9, the first quarter report of 2024 shows that CCB's asset quality remains stable, and core indicators such as non-performing ratio, loan-to-loan ratio, and provision coverage ratio show that its provision and overall risk offset ability are relatively sufficient. The core Tier 1 capital adequacy ratio was 14.11%, an increase of 0.96 percentage points from the end of 2023, providing sufficient capital support for the subsequent balance sheet expansion, and continuing to be optimistic about the subsequent development of CCB.
Author | Han