Core ideas:
According to the Bank of Shanghai's semi-annual report for 2022, 22H1 revenue, PPOP and homecoming net profit increased by 0.9%, 0.7% and 3.2% compared with the same period last year, which decreased by 2.1pcts, 1.3pcts and 2.2pcts respectively compared with 22Q1. Under the influence of the epidemic in Shanghai, Q2's single-quarter profit increased by 1.4%, which was lower than that of Q1.
Revenue is mainly dragged down by fee and commission income and other non-interest income: (1) net interest income increased by 5.7% year-on-year, average growth rate of interest-bearing assets decreased slightly by 7.8% (vs.21H1:9.6%), and net interest margin narrowed by 7BP to 1.66% year-on-year. (2) income from fees and commissions decreased by 18.6% compared with the same period last year, mainly due to the decrease in income from agency fees and consultants and consulting fees. The decrease in agency fee income is mainly due to the substantial increase in investment management income caused by the liquidation of stock expected income products during the rectification of the new regulations last year, and the increase in the base base due to the substantial increase in the investment management income of valet property management products, and the consultant and consulting fees are mainly affected by the decline in syndicated loan business and financial consultant business income. (3) the total profit and loss of investment income, fair value change and exchange decreased by 1.0% compared with the same period last year, resulting in a decrease of 1.29% in other non-interest income.
The growth rate slowed down, the public demand was stronger than retail, and the total loan increased by 53.7 billion yuan, or 4.4% (vs.21H1:7.9%) over the beginning of the year, mainly supported by infrastructure (including leasing and business services) and manufacturing loans; Pratt & Whitney small and micro loans increased by 15.6 billion yuan, or 21.7%, over the beginning of the year; and green loans increased by 29.3 billion yuan, or 96.6%, over the beginning of the year. Science and technology financial loans increased by 17 billion yuan, or 19.5%, over the beginning of the year.
Interest spreads have narrowed somewhat, but market-oriented debt reduction is the main support. 22H1 spreads are 1.66%, narrowing 8BP than 21A and 7BP year-on-year, showing that the rate of return at the asset end is faster than the cost rate at the debt end. The rate of return on loans and financial investment affected by the epidemic has declined, with the yield on 22H1 loans falling to 4.57% (vs.21A:4.72%) and the rate of return on financial investment falling to 3.39% (vs.21A:3.66%). On the debt side, the overall interest rate rose to 2.11% (vs.21A:2.07%) as a result of higher deposit costs. The reduction in the cost of market-oriented debt is the main support of interest spreads, with interbank debt payment rates falling to 2.01 per cent (vs.21A:2.16%) and bond issuance rates falling to 2.90 per cent (vs.21A:3.02%).
Asset quality remains stable, and the increase in deviation is mainly affected by large amounts to creditor's rights. At the end of June, the non-performing rate was 1.25%, which was unchanged from the previous month; the concerned loan rate was 1.66%, up 6BP from the previous month; and the overdue loan rate was 1.86%, which was much better than the 22BP drop at the end of 21. It is estimated that the annualized bad generation rate of 22H1 is 0.74%, which is better than that of 21A in 16BP. The bad deviation increased to 111.1% (vs.21A:110.4%), and the higher deviation was mainly due to the overdue inclusion of Peking University founder into the debt committee; the provision coverage rate was 302.24%, with a month-on-month drop in 1.4pcts.
Profit forecast and investment advice: it is estimated that the growth rate of net profit of 22max in 23 years is 4.2%, 7.5%, 1.54 and 15.52 yuan per share, respectively, and BVPS is 14.21 and 15.52 yuan per share, respectively. The current stock price corresponds to the growth rate of 22max in 23 years. PB is 0.41X/0.38X. Considering that it is mainly affected by the epidemic in Shanghai, the company is given a 22-year PB of 0.5 times, with a reasonable value of 7.11 yuan per share, maintaining a "buy" rating.
Risk hints: (1) economic growth has declined more than expected; (2) asset quality has deteriorated significantly; and (3) interest rate spreads have narrowed more than expected.