PSBC Earnings: Better-Than-Expected Revenue Growth Was Offset by Hike in Deposit Agency Fees

We retain our fair value estimate for Postal Savings Bank of China's, or PSBC, at HKD 6.5 per H share, as we leave assumptions largely unchanged after results which reported year-on-year net profit slowing to 1.2%. PSBC keeps dividend payout unchanged at 30%, resulting in a 1.2% increase in DPS to CNY 2.61 per share. We think the market may be disappointed by its weaker-than-expected growth in net profit and DPS. Net profit growth was dragged by a 12.4% increase in deposit agency fee rate, which resulted in deteriorating cost/income ratio. Average net interest spread of the Big Four banks fell to 1.44% in 2023, triggering the adjustment threshold for deposit agency fee rate schedule. We expect PSBC and its Postal Group parent will start a comprehensive review and renegotiate the agency fee rate in 2024.