1. Event Overview The company released its 2019 annual report and 2020 quarterly report: 2020Q1 net profit increased 10.10% year-on-year (13.27% in 2019, 11.49% in the first three quarters of 2019), and revenue increased 3.55% year-on-year (14.55% in 2019, 18.26% in the first three quarters of 2019). Total profit before provision increased 7.17% year over year (up 18.09% in 2019). The annualized weighted ROE for the first quarter was 12.84% (2019 weighted ROE 11.94%, the annualized weighted ROE for the first three quarters was 12.13%), down 64 bps from the previous year. In 2019, the company plans to distribute cash dividends of 1.85 yuan (tax included) for every 10 shares, with a cash dividend ratio of 30.74%, an increase of 64 bps over the previous year. 2. Analysis and judgment. The impact of the epidemic is limited. The impact of the epidemic is limited. In 2019, the company's full-year net profit increased 13.27% year-on-year. The growth rate was the highest level since the past 7 years, up 1.79pct from the previous three quarters, and was at the forefront of commercial banks in listed cities. Due to the decline in the year-on-year growth rate of investment income and the narrowing of net interest spreads, 2020Q1 revenue grew by 3.55% year-on-year, down 11pct from 2019. Despite a sharp decline in revenue growth, net profit grew 10.10% year over year and maintained double digit growth. This was mainly due to the decline in the year-on-year growth rate of provisions. The net interest spread is at the top of the industry, and the downward pressure has been mitigated. The net interest spread of the company is at the forefront of the industry, and the comparative advantage is obvious. The decline in annualized cumulative net interest spreads from the end of 2019Q3 to the end of 2020Q1 is mainly due to the increase in the cost ratio of interest-bearing debt. We speculate that the increase in the cost ratio of interest-bearing debt is due, on the one hand, to an increase in the share of personal deposits with relatively high cost rates, and on the other hand, to a decline in the demand rate for public deposits and personal savings. Interest rates in the interbank market are in a long-term downward channel. Since the beginning of 2020, the 3-month, 6-month, and 9-month Shibor have declined by 1.63 pct, 1.56 pct, and 1.49 pct, respectively, and there is still some room for decline in the future. At the end of 2020Q1, corporate interbank liabilities (including central bank loans) and payable bonds accounted for 31.12%, which is at a high level for listed banks. It is expected that in the future, they will benefit to a large extent from declining interest rates in the interbank market, so there is some room to ease the cost pressure on interest-bearing debt. The decline in interest-bearing asset yields is the main reason for the decline in net interest spreads for the annualized single quarter in 2020Q1. We speculate that this may be due to the impact of the pandemic, companies are investing more in public loans and are leaning towards lower risk industries. In the long run, the company's share of interbank assets is low among urban commercial banks, and is relatively less affected by declining interest rates in the interbank market. In the future, as the domestic epidemic improves further, the resumption of work and production continues to advance, consumer demand recovers, the company's personal business will return to normal, and the downward pressure on returns on interest-bearing assets is expected to ease. The non-performing rate hit a new low in the past five years. The non-performing rate of controllable companies affected by the epidemic ranked low among listed banks, and was in a long-term declining channel. The non-performing loan ratio at the end of 2020Q1 was 1.17%, down 1 bps from month to month, at its lowest level in nearly 5 years. Affected by the pandemic, the proportion of concerned loans at the end of 2020Q1 was 2.69%, up 28 bps from the end of 2019 Q4, and the pressure to generate hidden non-performing loans increased slightly. However, the company 1) has a high ability to withstand risks and continues to grow. The company's provision coverage rate at the end of 2020Q1 was 271.36%, up 8.95pct from the end of 2019Q4, a new high in the past six quarters. 2) Credit enhancement measures have been strengthened. The loan mortgage rate at the end of 2019Q4 was 44.59%, up 56 bps from the end of Q2. 3) Loan investment is skewed towards public low-risk businesses. As the retail business has been hit relatively hard by the pandemic, the company has stepped up its investment in public loans. Public loans at the end of 2020Q1 accounted for 57.44%, an increase of 57 bps over the previous month, the first increase in share in the past five quarters. Meanwhile, the share of personal loans and discounts fell by 34 bps and 22 bps, respectively. In terms of industry choices, the company continues to reduce the share of high-risk batch and manufacturing loans. At the end of 2019Q4, loans to retail and manufacturing industries accounted for a total of 12.56%, down 4.87pct from the end of 2019Q2. In summary, we believe that the quality of the company's assets is relatively good. Although the epidemic has brought some pressure, its impact is manageable. The capital adequacy ratio is leading, and ROE can be expected to increase, and the company is very capitalized. As of the end of 2019Q3, the core Tier 1 capital adequacy ratio and Tier 1 capital adequacy ratio both ranked first among urban commercial banks, and the capital adequacy ratio also ranked among the highest among urban commercial banks. By the end of 2020Q1, the company's core Tier 1 capital adequacy ratio was 12.84%, Tier 1 capital adequacy ratio was 12.85%, and capital adequacy ratio was 15.05%, up 22 bps, 23 bps, and 20 bps respectively from the end of 2019, all far above the corresponding regulatory requirements. On March 20, 2020, the Shaanxi Banking Insurance Regulatory Bureau approved the issuance of secondary capital bonds of no more than 4 billion yuan by the company. The capital is expected to be further replenished. The company's core profitability is outstanding. The cumulative annualized ROA for the first three quarters of 2019 was 1.05%, ranking third among commercial banks in listed cities. Adequate capital lays a solid foundation for the company to expand in scale. In the future, as the scale expands rapidly and the equity coefficient increases, the company's ROE is expected to increase. 3. Investment recommendations Under the influence of the epidemic, the continuous optimization of the company's asset quality is a major highlight. Adequate and continuously improved provision coverage has not only improved risk resilience, but also increased room for profit recovery. The company's net interest spread is among the highest in the industry, and there is room for relief from the downward pressure. The company continues to promote digital, characteristic and comprehensive transformation, and adheres to the balanced development of “scale, efficiency and quality”. In the future, as the epidemic improves further, the resumption of work and production continues to advance, and credit demand recovers, the company will gradually achieve balanced growth in personal and corporate loans. We forecast net profit growth rates of 9.14%, 11.17%, and 13.30% in 2020-2022, respectively. In 2020, the corresponding BVPS was 5.79 yuan, and the corresponding PB was 0.96 times, giving it a “recommended” rating for the first time. 4. Risk warning: Asset quality is disrupted, and net interest spreads have declined.