Lanzhou Bank ploughs the northwest economic town, small and medium-sized business has a solid foundation, actively promote retail transformation and major customer strategy, asset-liability structure continues to optimize, asset quality ushered in marginal improvement.
Gansu Province is an important platform and industrial base for the development of the western region, and Lanzhou is a "strong provincial capital".
The strategic position is prominent. Lanzhou Bank has significant regional advantages in Lanzhou, the number of outlets is significantly higher than the average level of the four major banks, the scale of deposits and loans ranks first among commercial banks in the province, and the fundamentals are solid.
Keep up with the regional strategic layout and actively promote the public business to "small and medium-sized + large and medium-sized projects"
Pay equal attention to the model development. Lanzhou Bank is rooted in small and medium-sized enterprises in Gansu. At the end of 2021, the loan balance of small and medium-sized enterprises accounted for 81.38% of public loans, of which the balance of small and micro loans accounted for 49.24% of public loans. The mature and rich product system and financial service technology help sinking customers, supporting the yield of 6.03% of public loans, ranking first among listed banks. While deeply ploughing small and medium-sized and micro businesses, Lanzhou Bank, relying on strategic opportunities and location advantages, has established a major project marketing mechanism and reserve system, focusing on supporting infrastructure construction and the development of advanced manufacturing represented by new energy. to promote the economic transformation and development of Lanzhou through integrated financial services.
The retail business has been actively transformed, and the deposit and loan structure has been optimized to invigorate the stock. On the asset side, Lanzhou Bank accelerated the online transformation of retail business and launched a personal banking and e-commerce service platform-Baihe Life Network, which enriches the consumption and financial management scene, and promotes the high-yield consumer loan business to grow by 67.58% in 2021, driving the average rate of return of retail loans to increase by 20bps to 5.55% compared with the same period last year. At the same time, it also led to an increase of 25.2% in the balance of retail loans in Lanzhou Bank. The proportion increased 6pct to 28.29%, and the asset structure was further optimized. On the debt side, the balance of retail deposits of the company maintained a steady growth at the end of 2021, accounting for 64.34% of total deposits. Looking to the future, the regulatory guidance and the market-oriented adjustment mechanism of deposit interest rate are expected to promote the further decline of deposit interest rate. In 2021, the company's retail deposit cost rate was 3.75%, a year-on-year decline of 18bps, driving the total deposit cost rate down 10bps.
Asset quality has passed the maximum pressure point and returned to the marginal trend. The asset quality of Lanzhou Bank has been improving continuously since 2019. By the end of 2021, the defect rate had fallen by 71bps to 1.73 per cent from 2019, well below the regional average of 6.06 per cent. The generation rate of write-off defects has declined for three consecutive years, and the provision coverage rate has increased steadily. It is estimated that if the proportion of subsequent retail loans is further increased to 30%, 35%, 40%, the defect rate is expected to drop to 1.68%, 1.59%, 1.51%.
The current 0.94 times 22-year PB does not reflect Lanzhou Bank's local geographical and operational advantages, as well as the core competitiveness and long-term development potential of the public business "small and micro + large and medium-sized projects" with equal emphasis on the development and retail business deepening transformation. In the future, Lanzhou Bank will continue to benefit from the policies brought about by the national development strategy of "Belt and Road Initiative" and "Western Development" to support Xiaobai Maimai Inc's demand, and rely on the continuous optimization and improvement of negative asset structure and asset quality. bring a new round of growth momentum to the company's performance. First coverage, given a buy rating, with a target valuation of 1.2x 22 PB.