Investment points: the revenue and profit of Bank of Shanghai Q3 continues to recover, the retail business develops vigorously, and we maintain a "better than the market" rating.
Q3 revenue and profits continue to recover. In 21 years, the operating income of Bank of Shanghai Q1-3 increased by 10.44% compared with the same period last year, and the net profit increased by 10.58%. The revenue and net profit increased by 13.43% and 11.36% respectively in the single quarter, showing a recovery. Compared with the end of 2020, customer loans increased by 10.42%, accounting for 45.72% of total assets, an increase of 0.63 percentage points compared with Q2; customer deposits increased by 12.28% compared with the end of 2020, accounting for 59.43% of total liabilities, an increase of 1.05 percentage points compared with Q2. Shanghai Bank further focused on deposit and loan business.
Retail efforts, focus on wealth management. The retail AUM of Bank of Shanghai Q3 was 881.5 billion yuan, an increase of 17.68 percent over the end of 2020, and the balance of inclusive financial loans was 63.266 billion yuan, an increase of 44.23 percent over the end of 2020. In 21 years, Q1-3 realized wealth management intermediary business income of 1.161 billion yuan, a year-on-year increase of 33.80%. The number of platinum, wealth and private customers (management monthly average AUM of 300000 yuan, 1 million yuan, 8 million yuan and above) were 703300, 188500 and 5755 respectively, up 14.57%, 24.57% and 30.47% respectively over the end of 2020.
Asset quality continues to improve. The defective rate of Q3 in Shanghai Bank in 21 years is 1.19%, which is the same as that of Q2. Interest loans in Q3 were 1.70%, a drop of 16bp compared with Q2. The provision coverage of Q3 was 331.77%, an increase of 7.73 percentage points compared with Q2, and the loan ratio increased from 3.85% of Q2 to 3.94% of Q3.
Investment advice. We predict that the EPS from 2021 to 2023 will be 1.59,1.84,2.10 yuan, and the growth rate of net profit will be 13.17%, 14.70% and 14.05% respectively. According to the DDM model (see Table 2), we get the reasonable value of 9.93 yuan. According to the PB-ROE model, we value the company's 2021E PB at 0.80 times (comparable company is 0.90 times), and the corresponding reasonable value is 10.55 yuan. Therefore, the reasonable value range is 9.93-10.55 yuan (corresponding to 2021 PE 6.25-6.64 times, peer companies corresponding to PE 6.72 times), we maintain a "better than the market" rating.
Risk hint. The solvency of enterprises has declined, the quality of assets has deteriorated significantly, and major changes have taken place in financial regulatory policies.