Report summary
Company Overview
Jiutai Agricultural Commercial Bank is an agricultural commercial bank in Northeast China. The company is also a holding company of 21 majority-owned subsidiary banks and 16 non-majority-owned subsidiary banks. Each subsidiary bank operates independently. In 2013 and 2015, Jiutai Agricultural Commercial Bank was rated as the “National Rural Commercial Bank Benchmark Bank” by the China Banking Regulatory Commission. The company's main revenue comes from Jilin Province, accounting for about 90% of the company's operating income.
The company's main business: corporate banking, retail banking, capital business. The company owns 37 subsidiary banks, including 5 agricultural commercial banks restructured through the acquisition of rural credit cooperatives and rural cooperative banks; 30 village banks established by the company; and 2 village banks acquired by the company.
The company's total assets and net assets at the end of 2015 were $141.95 billion and RMB 118.57 billion respectively.
2013-15 total assets CAGR 60.4%, 2013-15 net assets CAGR 59.2%.
Revenue in 2015 increased 31% year on year to 4.27 billion, net profit increased 10.2% year on year to 1.2 billion yuan, revenue in the first half of 2016 increased 69% year on year to $2.65 billion, and net profit increased 70% year on year to 870 million. Risk control was better in 2015 and 1H16 non-performing loan ratios of 1.42% and 1.57%, and provision coverage rates of 206.86% and 198.18%.
Status and prospects of the industry
China's banking industry includes five major commercial banks, joint stock commercial banks, urban commercial banks, rural financial institutions, foreign capital, and others. The overall growth of the banking sector has been steady, with macroeconomic growth. The total assets of the banking sector in Jilin Province reached 27404 billion at the end of 2015, with a CAGR of 15.9% in 10-15 years.
Financial institutions in rural China include rural commercial banks, rural credit cooperatives, rural cooperative banks, village banks, and rural mutual funds cooperatives. China's rural commercial banks are 15234 billion, with a CAGR of 41% in 10-15 years.
Advantages and opportunities
Local government strategies and favorable policies bring market opportunities;
Strategic mergers, acquisitions and restructuring and cross-regional business development models and strategic layout;
Unique “Three Farmers” and SME services.
Weaknesses and risks
The rising trend of potential loan non-performing rates in the industry;
Subbanks are given a high degree of independent operating authority. Subbanks deviate from the Bank's expectations or guidance in operating business, causing financial and operating risks.
valuations
The prospectus pricing corresponds to the fully diluted price-earnings ratio of 13.0-13.6 times for the 2015 fiscal year. The company did not give a profit forecast for 2016 in the prospectus. If the net profit growth rate for the previous year was initially estimated for the full year, the price-earnings ratio for the 2016 exam was 8.1-8.5 times, higher than that of banking companies listed on the Hong Kong stock market, and the company needed to maintain relatively independent operations and control risks for its subsidiaries. We gave the IPO a special rating of “5”.