Main points of investment
Bank of Shanghai 22H1 revenue profit growth slowed, interest rate spread is expected to narrow, the poor performance is better than expected.
Data overview
22H1 revenue increased by 0.9% compared with the same period last year, with a growth rate of-2.1pc; net profit from home increased by 3.2% compared with the same period last year; the growth rate of ROE (annualized) was 13.3% compared with that of-2.2pc (annualized); and that of ROA (annualized) was 0.93% and-4bp compared with the same period last year. The final defect rate of 22Q2 is 1.25%, the month-on-month ratio is the same, and the provision coverage rate is 302%, the month-on-1.4pc ratio.
The growth rate of revenue and profit slows down
The revenue of 22H1 Bank of Shanghai increased by 0.9% year-on-year, with a growth rate of-2.1pc, while its net profit increased by 3.2% year-on-year, with a month-on-month growth rate of-2.2pc. The main drag is the slowdown in scale growth and the narrowing of interest spreads. Specifically, at the end of ① 22H1, the assets of Shanghai Bank increased by 7.1% compared with the same period last year, with a month-on-month growth rate of-1pc, due to the implementation of static management in Shanghai after the outbreak of the epidemic in April and May, resulting in offline business stagnation, affecting the company's operation. ② 22Q2 quarterly net interest margin (beginning and end)-8bp to 1.61%, due to the return on assets fell more than the debt cost ratio. With the normalization of epidemic prevention and control, steady growth measures and credit recovery, performance growth is expected to pick up.
The decline in interest rate spreads is expected to narrow
22Q2 Bank of Shanghai net interest margin (beginning and end) quarter-on-quarter-8bp to 1.61%, due to the decline in the rate of return on assets greater than the debt cost ratio. ① from the asset side, 22Q2 Bank of Shanghai asset return-15bp to 3.76%, attributed to the first half of the loan mainly to the public, as well as the downward pricing of industry loans. ② from the debt side, 22Q2 Bank of Shanghai debt cost ratio-9bp to 2.13%, thanks to the increase in the proportion of deposits and grasp the band of low market interest rates to increase the absorption of low-cost interbank debt. Looking ahead, the decline in Shanghai Bank interest rate spreads is expected to narrow, mainly because: as the economy repairs, the demand for retail credit is expected to pick up; after the adjustment of deposit pricing mechanism, the cost of medium-and long-term deposits is expected to fall further.
Poor performance is better than expected
The final defect rate of 22Q2 is unchanged at 1.25% month-on-month, the follow-up rate is + 6bp to 1.66% (basically the same as at the beginning of the year), and the overdue rate is 1.86% higher than at the beginning of the year-22bp. The bad is basically better than expected. Among them, the concern rate fluctuated slightly, mainly due to the impact of the epidemic on the repayment ability of individual industrial and commercial households and residents, and the risk pressure on retail loans increased in stages. The final provision coverage of 22Q2 is basically maintained at a high level of 302%, and the level of provision is adequate.
Profit forecast and valuation
Bank of Shanghai is expected to increase its net profit from 2022 to 2024 by 5.9%, 11.0% and 10.7%, corresponding to BPS14.57/14.75/14.94 yuan per share. The current price corresponds to the PB valuation of 0.40, 0.40, and 0.39 times. Considering the epidemic situation and economic uncertainty, the target price is reduced to 7.50 yuan per share, corresponding to 0.51 times of 22-year PB, and the current price space is 29%.
Risk hint
Macro-economic stall, bad substantial exposure.