Investment key points profit growth before revenue and provision is high, and provision intensity is further increased. Societe Generale released its 2011 interim results report: the net profit of shareholders belonging to the parent company in the first half of the year was 17.102 billion yuan, an increase of 39.81% over the same period last year, and earnings per share was 1.59 yuan. The overall performance was in line with our expectations, but revenue and pre-provision profit increased by 57.06 per cent and 69.98 per cent respectively compared with the same period last year, exceeding our expectations. On this basis, Societe Generale once again increased its provision, with the credit cost ratio reaching about 1.09 per cent in the second quarter, higher than 42BP in the first quarter, and the end-of-period loan ratio rising to 1.82 per cent.
Due to the inter-industry maturity mismatch, interest rate spreads remained high in the second quarter. Since the fourth quarter of last year, Societe Generale has achieved rapid growth in net interest income by rapidly increasing the allocation of interbank assets and liabilities. due to maturity mismatch, asset-end pricing is later than debt-side. In the case of gradually lower money market interest rates in the first half of this year, Societe Generale's interest spreads remained high in the second quarter, and even increased by about 9BP compared with the first quarter.
The change of asset quality is generally controllable. At the end of the second quarter, the balance of non-performing loans in Societe Generale rose slightly by 176 million yuan to 4.212 billion yuan compared with the end of the first quarter, but the non-performing rate remained at 0.4%. Taking into account the write-off factor of 546 million, the non-performing rate in the first half of the year was about 21BP. In addition, the overdue loan ratio of Societe Generale rose from 0.63% at the end of 2011 to 0.80% at the end of the second quarter, but on the whole it is still at a low level. We believe that the asset quality of Societe Generale remains controllable.
Finance and valuation We expect earnings per share from 2012 to 2014 to be 2.92,3.40,3.92 yuan respectively. Despite the pressure of narrowing spreads in the second half of the year, the high growth of medium-term results has laid the foundation for high growth throughout the year. It is expected that the asset quality of Societe Generale will still be in a controllable state, with a target price of 16.60 yuan and maintaining the company's buy rating.
