Guiyang Bank resonates with the regional strategy in the same frequency, the scale growth is steady, the risk identification is strict, the operating performance continues to recover, and maintains the "overweight" rating.
Matters: Guiyang Bank released its annual report of 2021 and quarterly report of 2022. The operating income of 2021 and 2022Q1 were-6.70% and 2.48% respectively compared with the same period last year, and the net profit was + 2.07%, respectively. The non-performing loan ratio of 2022Q1 increased by 0.15pct to 1.60% compared with the end of last year.
Performance profile: revenue is good, profit is steady. Guiyang Bank 2022Q1 revenue growth rate picked up, profit growth remains robust. 1) net interest side: nearly 90% of the company's revenue is net interest income. 2021 and 2022Q1 net interest income year-on-year-5.29% less than 0.90%. Although 2022Q1 interest spreads are down, asset growth picks up with volume premium to ensure a return to net interest income growth; 2) non-interest side: year-on-year non-interest income of the company in 2021 and 2022Q1 non-interest income year-on-year-14.90% quarter 16.16% 2022Q1 non-interest income growth repair significantly also contributed to revenue growth. 3) Expenditure side: the company's cost-to-income ratio increased by 3.62pcts year-on-year in 2021, mainly because the company continued to increase investment in science and technology; 2022Q1 cost-to-income ratio decreased by 0.56pcts to 23.26% compared with the same period last year, and cost control began to be optimized.
Interest business: balance sheet expansion picked up and interest spreads narrowed slightly. 1) the expansion of assets and liabilities has picked up, and the growth of loans is good: at the end of 2021, the assets and liabilities of the company were + 3.05% and 1.54% respectively compared with the same period last year, of which the principal of loans and deposits were + 10.38% and 1.30% respectively compared with the same period last year. The total assets and liabilities at the end of 2022Q1 were + 4.23% and 2.80% respectively compared with the same period last year, of which loans and deposits were + 9.37% and 2.45% respectively compared with the same period last year. The overall growth rate of assets and liabilities picked up, and loans continued the better growth trend in 2021. It is speculated that it is related to regional strategy and active support for key areas such as superior manufacturing, green industries, and high-tech enterprises. 2) the interest margin narrowed slightly: the company's net interest margin in 2021 was 2.26%, the same as the annualized level at the end of half a year, and the 2022Q1 net interest margin was 2.18%, slightly narrower than that in 2021, presumably due to the reduction of policy interest rates at the beginning of the year and the impact of the real economy.
Non-interest business: the growth of investment income is bright, and the performance of middle income business is lacklustre. 1) the growth of investment income is eye-catching: the company's 2022Q1 "investment income + fair value change profit and loss" is + 77.53% compared with the same period last year. The high growth of investment business income leads to a significant repair of non-interest income growth. 2) the performance of the mid-income business is lacklustre: the company's 2022Q1 fee and commission net income is-15.30% compared with the same period last year, which is presumed to be affected by the decline in wealth management business income due to fluctuations in the capital market in the first quarter of this year. The company promotes retail transformation and upgrading, effective customers and wealth customers continue to grow, and the mid-income growth rate is expected to be repaired.
Risk status: the identification of defects is strict and the level of provision is adequate. 1) fluctuation of book asset quality: the non-performing loan ratio and concern loan ratio of 2022Q1 Company were 1.60% and 3.69% respectively, which increased by 0.15pct/0.62pct compared with the end of last year. On the one hand, the asset quality fluctuated because the risks of some industries increased in stages under the influence of the epidemic, on the other hand, because the company strictly determined the asset classification in order to consolidate the asset quality. 2) adequate risk offset capacity: the company's 2022Q1 final provision coverage rate is 260.25%, which is lower than that at the end of last year, but still maintains a relatively sufficient level.
Risk factors: macroeconomic growth fell faster than expected; asset quality deteriorated significantly.
Investment suggestion: Guiyang Bank resonates with the regional strategy on the same frequency, the scale growth is steady, the risk identification is strict, and the operating performance continues to recover. We slightly adjust the company's 2022 EPS forecast to 1.62 yuan (original forecast 1.66 yuan), the new 2023 EPS forecast is 1.73 yuan, the current A share price corresponds to 2022 0.43xPB, considering the gradual stabilization of corporate interest spreads, there is room for credit cost improvement. Combined with the comparable inter-industry valuation range distribution, the company is given a target valuation of 0.60x PB (2022) in the coming year, corresponding to the target price of 8.50 yuan, and maintaining the "overweight" rating.