Incident On April 21, the Bank of Xi'an announced its 2019 annual report and 2020 first quarter report. Among them, 2019 operating income increased 14.55% year on year, net profit increased 13.27% year on year; revenue for the first quarter of 2020 increased 3.55% year on year, and net profit increased 10.10% year on year. Brief review of revenue and net profit in 2019 maintained a high growth rate. ROE declined year-on-year in 2019, operating income in 2019 was 6.845 billion yuan, up 14.55% year on year; net profit was 2,675 billion yuan, up 13.27% year on year. Looking at a single quarter, 4Q revenue increased 4.81% year on year, up 0.35 percentage points from the previous quarter's growth rate; 4Q net profit increased 19.05% year on year, up 6.66 percentage points from the previous quarter's growth rate. In terms of revenue structure, net interest income increased 10.13% year on year, and net non-interest income increased 40.41% year on year. The weighted annualized ROE reached 11.94%, down 0.67 percentage points from the same period last year. EPS was 0.61 yuan/share, an increase of 0.02 yuan over the same period last year. BVPS was 5.31 yuan/share, an increase of 0.33 yuan over the same period last year. 2. Net income from interest and non-interest increased Net interest income in 2019 was 5.621 billion yuan, an increase of 10.13% over the previous year; it accounted for 82.11% of total revenue, down 3.29 percentage points from the same period last year. The net interest spread for the year was 2.26%, up 3 bps from the beginning of the year and down 4 bps from the first half of the year. Specifically, the asset-side yield rose by 14 bps to 4.63%, mainly because the loan yield increased by 46 bps to 5.61%. On the debt side, the overall debt ratio rose by 2 bps to 2.51%. Among them, the deposit debt ratio increased sharply by 42 bps, mainly due to intense deposit competition in 2019 and the increasing absorption of high-interest products by small and medium-sized banks. However, interest rates on bonds and interbank debt fell by 109 bps and 42 bps month-on-month, which basically hedged the impact of rising deposits. Net income from fees and commissions was $581 million, a year-on-year decrease of $201 million, or 25.67%. Mainly, fee revenue from agency services, trade finance and guarantee services, and settlement and settlement services declined. Net non-interest income was 1,224 million yuan, up 40.41% year on year. Among them, almost all of the increase in net non-interest income came from investment income: investment income of 602 million yuan, up 1016.60% year on year. 3. Asset quality was stable. The provision coverage rate increased net loans and advances of $148.8 billion for the year, up 15.10% from the beginning of the year. The balance of non-performing loans was $1,802 million, up $208 million from the beginning of the year. The non-performing rate was 1.18%, down 2 bps from the beginning of the year, and down 1 bps from the previous month. Focus loans for the whole year were $3.681 billion, up 22.42% from the beginning of the year. Focus loans accounted for 2.41%, up 0.14 percentage points from the beginning of the year. Asset impairment losses amounted to $4.735 billion, up 37.11% year on year; write-off plus transfer of $334 million, down 13.85% year on year. Provision coverage has been significantly improved. The annual provision coverage rate was 262.41%, an increase of 45.88 percentage points over the beginning of the year. The annual loan disbursement ratio was 3.09%, up 0.49 percentage points from the beginning of the year. 4. The IPO significantly increased the capital adequacy ratio and maintained a high level of core level 1, level 1, and capital adequacy at the end of 2019 at the end of 2019, which was 12.62%, 12.62%, and 14.85% respectively. The increase in capital adequacy was 75 bp, 75 bp, and 68 bp respectively from the beginning of the year. The increase in capital adequacy of various types was mainly due to A-share IPO financing. 5. Business conditions for the first quarter of 2020: Revenue for the first quarter was 1,758 billion yuan, up 3.55% year on year. Net profit was 770 million yuan, up 10.10% year on year. The reason for the small change in operating income and the large increase in net profit is that operating expenses for the first quarter fell by 202 million yuan compared to the same period last year, mainly due to lower business and management expenses. Meanwhile, non-operating expenses were 138 times that of the previous year, due to an increase in donation expenses. The 1Q non-performing loan ratio was 1.17%, down 0.01% from the end of the previous year, and 2.69% from the end of the previous year, up 0.28% from the end of the previous year. Obviously, the Bank of Xi'an is located in the Midwest and has been less affected by the epidemic. The non-performing rate continues to decline, and the asset quality is stable, but the rising share of concerns is worth paying attention to. Provision coverage continues to improve. At the end of the first quarter, the provision coverage rate was 271.36%, up 8.95% from the end of the previous year; the loan provision rate was 3.17%, up 0.08% from the end of the previous year. At the end of the first quarter, the capital adequacy ratio was 15.05%, the Tier 1 capital adequacy ratio was 12.85%, and the core Tier 1 capital adequacy ratio was 12.84%, all higher than regulatory requirements. 1Q credit investment has increased dramatically, but capital adequacy ratios have rebounded markedly at all levels, possibly due to the transfer of profits to capital. 6. Investment recommendations Judging from the results for the full year of 2019 and the first quarter of 2020, the revenue and net profit of the Bank of Xi'an maintained a high growth rate. At the same time, the non-performing rate continued to decline in the 19th and 1st quarter. The impact of the epidemic was slight, highlighting the advantages of steady operation and excellent asset quality. As a regional commercial bank rooted in the region and deeply involved in local economic development, the Bank of Xi'an has been able to make full use of the advantages of Xi'an's GDP growth rate and tertiary sector share being at the forefront of first-tier cities. The growth rate of operating income and net profit in the fourth quarter accelerated. Among them, Huimu's net profit accelerated significantly and maintained rapid growth. At the same time, the Bank of Xi'an's non-performing rate continues to decline, maintaining the leading level of its peers, the provision coverage rate has increased dramatically, and there is less pressure on future planning. We continue to be optimistic about the Bank of Xi'an's performance in retail transformation and increasing investment in housing mortgages and consumer loans. Furthermore, the industry's highest core tier 1 capital adequacy provides strong support for future expansion. We forecast that the Bank of Xi'an's operating income from 2020 to 2022 will increase 11.21%/13.50%/15.89% year on year, net profit will increase 9.41%/13.82%/16.45% year on year, PE will be 8.4/7.4/6.3, and PB will be 1.05/0.97/0.88. Maintaining an increase in holdings rating, the valuation was affected by the pandemic, and the target price was adjusted to 6.6 yuan.