The core view is that the Bank of Xi'an has a good banking and government relationship with outstanding policy dividends. Strengthening retail+deep cultivation of regional industry finance is expected to inject new momentum into the company's sustainable development. For the first time, coverage was given an “increase in holdings” rating. Representatives of commercial banks in regional cities enjoy targeted policy support. The Bank of Xi'an was founded in 1995. Its major shareholders include state-owned shareholders, foreign investors, and leading local enterprises (the Xi'an Municipal Government's concerted actors hold a total of 24.4% of the shares). Good banking and government relationships and regional positioning have made the company's policy dividends outstanding: 1) one of the four regional urban commercial banks out of A-share listed banks (operating within the province only) continues to enjoy policy support such as targeted downgrades; 2) one of the two urban commercial banks in the LPR quotation bank, which reflects the regulatory authority's recognition of the company's ability to operate. Revenue growth declined in 2020, and cost savings were actively offset. The company's net profit growth rate in 2019/1Q20 was 13.3%/10.1% respectively. Profit continued to grow in double digits in the context of the pandemic, mainly contributing to backfeeding through cost control and provision. 1) On the revenue side, the revenue growth rate fell from 14.6% for the full year of last year to 3.6% in the first quarter, mainly due to the phased influence of payment and other counter businesses. Mid-quarter revenue fell 27.9% year-on-year in the first quarter. 2) On the expenditure side, strengthening cost control is a priority. The cost-to-income ratio for the first quarter was significantly reduced by 2.9pcts to 19.4% year-on-year. At the same time, relying on backfeeding provisions, the year-on-year growth rate for the quarter slowed to 2.9% (+36.0% for the whole year of 2019). The revenue contribution of the retail business continues to increase. 1) The asset side focuses on the consumer sector. In 2019, personal loans increased sharply by 19.5 billion dollars (growth rate 56.3%), of which the increase in consumer loans of 14 billion was the main driver, while the yield on personal loans increased significantly by 127 bps to 6.68%. In the first quarter of 2020, under the impact of the pandemic on the retail loan industry, corporate personal loans still recorded a positive growth of 2.4%. 2) The ability to divert debt-side deposits has increased. In 2019, personal savings increased by 15.3 billion dollars, accounting for 112% of total deposit growth. Personal savings also increased significantly by $7.1 billion in the 1Q20 quarter (up 9.7%). Benefiting from the strategic transformation of retail business, the company's retail finance business accounted for 30.4% of revenue in 2019, an increase of 7.0 pcts over the previous year. Adequate capital leading the way, providing space for capital management. In 2019/1Q20, the company's capital adequacy ratio was 14.85%/15.05%, respectively, maintaining a good level among commercial banks in listed cities. Thanks to: 1) internal source savings effects, while prudent expansion (asset growth rate of 7.4%/4.0%/14.3% in the past three years), the risk weighting coefficient was also under reasonable control (down 1.8 pcts to 69.1% in 2019), reflecting the saving effect brought about by the strength of retail business; 2) Additional support from external sources. After the 2019 IPO was replenished with 2.08 billion dollars in capital, 4 billion dollars were issued in 2020 The second-tier capital bond plan has also been approved by the Banking Insurance Regulatory Authority. Continued leadership in capital adequacy levels is conducive to the prudent expansion and structural optimization of the company's balance sheet, as well as to the level of shareholder returns (2018/19 dividend ratio of 30.1%/30.7%). Asset quality is generally stable, and there are sufficient provisions to respond positively to the impact of the epidemic. In 2019/1Q20, the company's non-performing rate was 1.18%/1.17%, respectively, which was significantly lower than the average of urban commercial banks (the average failure rate of urban commercial banks at the end of 2019 was 2.32%). The interest rate for loans reflecting broad asset quality increased slightly by 0.28pct to 2.69% in the first quarter. It is expected that this is mainly due to a phased increase in overpayments in some industries under the influence of the pandemic. In the first quarter, the company's provision coverage rate increased again by 8.9pcts to 271%, and the level of coverage and financial reserves were at a high level. Risk factors: Macroeconomic stagnation; risk worsens beyond expectations. Investment suggestions: Bank of Xi'an has a good banking relationship with outstanding policy dividends. Strengthening retail+deep cultivation of regional industry finance is expected to inject new momentum into the company's sustainable development. The company's 2020/21 EPS is expected to be 0.65 yuan/0.72 yuan respectively. The current valuation is 0.97 xPb (corresponding to 2021), covering the “increased holdings” rating for the first time.