Report guide
The Bank of Shanghai reported increased revenue growth, improved negative asset structure and improved asset quality in the third quarter.
Main points of investment
Data overview
21Q1-3 Bank of Shanghai's homing net profit is + 10.6% year-on-year, with a growth rate of 0.3pc; revenue year-on-year + 10.4%, growth rate + 1.4pcbot ROE 12.6%, year-on-year + 0.87%, year-on-year + 1bp; defect rate 1.19%, month-on-month flat, provision coverage 332%, month-on-month + 7.7pc.
Revenue growth increases
21Q1-3 Bank of Shanghai's revenue was + 10.4% year-on-year, with a month-on-month growth rate of + 1.4pc, mainly due to a rebound in other non-interest income growth. 21Q1-3 other non-interest year-on-year + 5.9%, growth rate + 14pc, due to low base effect.
At the same time, the middle income of wealth maintained a high growth, the income of 21Q3 wealth was + 34% compared with the same period last year, the number of customers and customer AUM both achieved rapid development, the number of retail customers was + 9% compared with the same period last year, and the AUM of customers was + 22% compared with the same period last year.
Looking ahead, the improvement in asset structure and wealth management strategy are expected to support continued revenue growth.
Improvement of negative structure
21Q3 Bank of Shanghai's quarterly net interest margin fell 2bp to 1.71% from the previous quarter, due to a decline in asset-end returns. It is speculated that due to the decline in lending rates, 21H1 loan yields fell 31bp from the beginning of the year. It is worth noting that the asset-negative structure of 21Q3 Bank of Shanghai has improved, the proportion of deposits and loans has increased, the loan growth rate is 2% month-on-month, the growth rate is 1 PC faster than the total assets, and the deposit growth rate is 3%, the growth rate is faster than the total debt 2pc. Looking to the future, the negative asset structure will improve, and the net interest margin of the Bank of Shanghai is expected to stabilize.
The quality of assets is good.
The non-performing rate of 21Q3 Bank of Shanghai was unchanged at 1.19% month-on-month. In terms of forward-looking indicators, we focus on the double decline in loans, the-6% ratio on the month-on-month basis, the significant decline in 16bp on the month-on-month ratio, and the significant improvement in asset quality. In terms of risk offset capacity, the provision coverage rate is from + 8pc to 332%, and the provision level is thickened; the 21Q3 non-credit impairment is 7.5 billion yuan, the provision strength is greatly increased (20Q3 non-credit impairment is 420 million yuan), and the non-credit provision level is consolidated. Looking to the future, the improvement of asset quality and the improvement of the level of provision are expected to support earnings growth.
Profit forecast and valuation
The revenue growth rate of the Bank of Shanghai has improved, the negative asset structure has improved, and the asset quality has improved. It is estimated that the net profit of homing in 21-23 will grow by 12.1%, 14.8% and 15.2%, corresponding to BPS 13.1, 13.3 and 13.6 yuan. Maintain the target price of 9.50 yuan, corresponding to the 21-year PB 0.72x. Current price corresponds to 21-year PB 0.57x, current price space 28%, buy rating.
Risk hint: macroeconomic stall, adverse exposure.