Jinwu Financial News | According to BOC International Development Research Report, judging from the profit growth rate, the combined profits of state-owned banks and stock banks that have announced results increased 0.6% year on year, down 6.4 percentage points from 2022. Judging from profit drivers, the profit growth of listed banks in 2023 is mainly due to scale contributions and provision contributions. In addition, investment income and income tax contributed positively to profits, but falling interest spreads, falling net income from handling fees and commissions, and costs and expenses dragged down profit growth.
The bank expects net interest spreads to continue to fall in 2024. The exact decline still depends on whether interest rate cuts will occur in the future. If there are no further interest rate cuts during the year, the decline in interest spreads is expected to narrow slightly compared to 2023. According to the bank, the bad performance rate of listed banks at the end of 2023 generally declined compared to the end of 2022, asset quality performance is stable, and attention still needs to be paid to key risk areas. Credit costs of state-owned banks are generally still higher than the net generation rate of bad money. At the same time, provision coverage is still at a relatively high level, and there is still some room to drive profit growth through provision release.
The bank expects net interest spreads to remain under downward pressure in 2024, and net revenue from handling fees is expected to decline year-on-year. In a context where revenue is under pressure to grow, the release of provisions is still an important factor affecting profit growth. As far as provision free up space is concerned, it is recommended to focus on listed banks with high provision coverage, low net generation rate of bad net generation, and higher credit costs than net bad generation rate, mainly including state-owned banks and CMB. Major H-share banks all have dividend ratios of over 7%, which is very attractive. In the current volatile market context, the bank believes that high dividends are still the main investment line in the sector, and it is recommended to focus on state-owned banks and CMB (03968, unrated).