Revenue and profit remained stable. Bank of Xi'an's net profit increased 1.97% year-on-year in Q1-3Q21, and operating income increased 3.07% year-on-year, maintaining relative stability.
Non-interest income is growing strongly, driving revenue. The non-interest income performance of the Bank of Xi'an was impressive. 1-3Q21 increased 18.62% year on year, a sharp increase of 17.04pct over 1H21. Non-interest income is the main driver of revenue growth. Among them, net profit and loss from changes in fair value turned negative and increased to 101 million dollars compared with the same period in 2020.
The scale of assets has been steadily expanding, and the share of individual loans has further increased. The total asset growth rate of Bank of Xi'an in 3Q21 was 10.89%, up 2.44 pct from 1H21. Loans accounted for 52.32%, down 2.11pct from 1H21. Looking at the loan structure, the share of personal loans rose steadily to 39.29% at the end of the third quarter, a slight increase of 0.1 pct from 1H21.
On the debt side, the Bank of Xi'an flexibly absorbed active debt, driving down the debt cost ratio. According to our estimates, Bank of Xi'an's 3Q21 debt cost ratio was 2.66%, a decrease of 3 bps over the previous month.
Concern+Bad is on the decline. Bank of Xi'an accounted for 2.86% of concerned loans at the end of the third quarter, down 0.51 pct from 1H21, the non-performing rate was 1.34%, up 0.15 pct from 1H21, up 0.36 pct from 1H21, and attention+bad at the end of the third quarter fell 0.36 pct from 1H21. Be cautious about bad plans, and asset quality was relatively good. At the same time, provision coverage was 224.37%, which remained at a reasonable level.
Investment advice. We forecast EPS of 0.62, 0.72, and 0.82 yuan in 2021-2023, with net profit growth rates of 0.59%, 14.63%, and 14.99%. We obtained a reasonable value of 5.03 yuan based on the DDM model (see Table 2); according to the PB-ROE model, the 2021E PB valuation for the company was 0.80 times (0.85 times for comparable companies), and the corresponding reasonable value was 4.95 yuan. Therefore, the reasonable value range given was 4.95-5.03 yuan (corresponding to 2021 PE was 7.98-8.11 times, and corresponding PE for interbank companies was 6.49 times), maintaining “superior to the market”
ratings.
Risk warning: The solvency of enterprises has declined, and asset quality has deteriorated drastically; major changes have occurred in financial supervision policies.