Qilu Bank expands presence across Shandong province

In 2023, the revenue of Qilu Bank reached 11.952 billion yuan ($1.66 billion), up 8.03 percent year-on-year. The net profit attributable to shareholders totaled 4.234 billion yuan, up 18.02 percent year-on-year, according to the bank's 2023 financial report released on Jan 19. The weighted average return on equity was 12.9 percent, an increase of 0.98 percentage points from the previous year.

Analysts at Wintrust Financial pointed out that as of the end of 2023, Qilu Bank's total assets exceeded 600 billion yuan, up 19.6 percent year-on-year, with an increase in growth rate of 3.74 percentage points from the end of the third quarter.

Since it's listing in 2021, Qilu Bank's asset growth rate at the end of each quarter has been kept above 15 percent, a steady increase in scale. Such growth is rooted in its focus on a new three-year development plan and digital transformation strategy, promoting cooperation with high-quality enterprises, supporting innovative technology and businesses, positive responses to policy and the effort made in improving the efficiency of credit allocation to Shandong's premium industries.

At the end of 2023, Qilu Bank's total loans amounted to 300.193 billion yuan, a 16.69 percent increase from the beginning of the year; total deposits reached 398.077 billion yuan, a 13.85 percent increase from the beginning of the year.

Under Shandong province's New and Old Kinetic Energy Conversion policy, Qilu Bank's expansion is expected to rise steadily and stably. As a city-level commercial bank serving the economic development of the Shandong region, Qilu Bank has seized opportunities in recent years to expand its presence. Taking the digital transformation as a major driving force, it incorporated high-tech tools into its development and paced its own way in business practice.

In November 2023, Qilu Bank held the first session of the Digital Innovation Competition. With the theme of Digital Qilu Creating the Future, the competition covered various sectors including corporate, retail, inclusive finance, risk, and operational businesses, encompassing emerging technologies such as artificial intelligence, big data, blockchain, and the internet of things, as well as some emerging business areas such as mobile finance, intelligent risk control, and cross-border e-commerce.

A total of 22 institutions submitted 89 innovative topics, with 12 topics entering the finals. The entries ranged from traditional businesses to cross-border e-commerce, from online customer acquisition to intelligent operations, fully demonstrating the business innovation capabilities and data application levels of Qilu Bank's branches.

The increasing revenue and profit provide room for the bank’s expansion of the balance sheet and showcase its resilience.

Analysts said such growth can also be attributed to Qilu Bank's rapid development in corporate loans, such as manufacturing and infrastructure. In the future, Qilu Bank is expected to benefit from new growth points such as retail and intermediary business.

In addition, as a regional corporate bank in Shandong province, Qilu Bank has adhered to its mission and continuously increased its support for the real economy. Inclusive finance is a flagship product that Qilu Bank has cultivated in the region. Since taking the lead in establishing the inclusive finance department in 2017 in Shandong province, Qilu Bank has focused on the county-oriented strategy and set up a distinctive business pattern of inclusive finance under the framework of rural revitalization. As of now, Qilu Bank's balance of inclusive microloans exceeds 55 billion yuan, ranking first among city-level commercial banks in Shandong province.

The financial report also indicates that there is a decrease in the non-performing loan ratio, which means the bank's asset quality has steadily improved.

Financial analysts said that according to the bank’s reports, the year-on-year growth in net profit reflects the banks' stable operations. In the context of the fluctuations in financial asset prices in 2023, the bank has made efforts to benefit the real economy regardless of the pressure and challenges caused by the compressed net interest between deposit and liability.

As of the end of 2023, Qilu Bank's non-performing loan ratio was 1.26 percent, a 3-basispoint decrease from the end of the previous year, which remained the same as the end of Q3 2023; the provision coverage ratio was 303.58 percent, a 22.52 percentage point increase from the end of the previous year, indicating a satisfactory safety margin.

Qilu Bank has continued to dispose of existing loans, strictly controlling risks in the process of expansion in other regions, leading to an improvement in non-performing indicators. The bank's capital indicators are also excellent, with its core Tier 1 capital adequacy ratio positioned at the upper level among comparable peers, reaching 9.73 percent in Q3 2023. Those indicators have provided a solid foundation for its future business development.

In November 2022, Qilu Bank began to issue convertible bonds. As of Jan 22, 8.74 percent of the bonds have been converted. Analysts predict that the proportion of convertible bonds is expected to increase, which will further supplement its core capital.

Qilu Bank has also expanded into lower-tier markets and cultivated the inclusive microfinance field. Despite the downward trend in interest spreads, the continuous high demand for credit has supported stable revenue growth, and the improvement in non-performing indicators points to a healthy asset quality. In light of this, Wintrust Financial maintains the "buy" rating for Qilu Bank.