Established agricultural and commercial banks rooted in Nanjing and surrounding areas, grid management focuses on small and micro local private enterprises. Zijin Agricultural Commercial Bank was founded in 2011 from four former agricultural credit cooperatives in Nanjing. It is headquartered in Nanjing and operates in the surrounding area of Nanjing. The company adheres to the market position of “serving the three rural areas, serving small and medium-sized enterprises, and serving urban and rural areas”, sank deep into the urbanization process in Nanjing through channels, benefited from regional economic impetus, and achieved relatively rapid development. The company positions itself as a micro+ retail, and sinks deep into the urbanization process in Nanjing through channels. Good relationships with local governments can be penetrated through community gridding. In recent years, the business has returned to its roots, gradually consolidating and optimizing the capital structure. 1) Assets are adjusted to the public sector, overall risk appetite is declining, and the share of credit is steadily increasing. Since 2017, the company's business has continued to return to its roots, and the ratio of loans to assets has gradually rebounded. Judging from the loan segmentation structure, it is mainly due to adjustments to the public sector. Overall risk appetite has gradually declined, and the share of low-risk loans, such as loans to the public water conservancy and leasing business industries, is increasing. At the same time, the increase in the share of personal loans is also due to the increase in the share of mortgage loans. 2) Debt is more dependent on peers, and the share of core debt is slowly rising. The company's overall debt-side structure is more dependent on interbank liabilities (including interbank deposits). The ratio of deposits to interest-bearing liabilities is lower than that of listed agricultural and commercial banks, making the company's overall interest-bearing debt level high during the period when market liquidity was tight in the early stages. Judging from the internal structure of deposits, although deposits are mainly time deposits, the share of corporate demand deposits is higher than the average of peers, and the company has the dual advantage of structure and pricing on the deposit side. Under structural optimization and adjustment, revenue and PPOP have gradually picked up over the past 18 years, driving net profit to achieve restorative growth. Over the past 17 years, under the gradual adjustment and optimization of the balance and liability structure, the revenue growth rate and PPOP growth rate have achieved restorative growth. At the same time, in '19, provisions have freed up profit margins, and the net profit growth rate has maintained a high level of growth. Interest spreads also rose slightly in 2019 under the gradual optimization of the structure. Considering that the company's deposit-side interest rate has a cost advantage, and as the company's business structure continues to adjust, the share of deposits and loans has further increased, we believe that there is still room for improvement in the company's interest spreads in the future, and the gap with other agricultural and commercial banks will gradually narrow. Adverse improvements have been obvious in recent years. The company's bad assessment is strict, and the level of bad generation is lower than that of peers. Judging from the most direct apparent data, Zijin Bank's non-performing rate is indeed at a high level for listed agricultural commercial banks in the Yangtze River Delta region, but in recent years, the non-performing rate has continued to improve, and the average level of listed agricultural and commercial banks in the Yangtze River Delta region is gradually weakening. Zijin Bank's net negative generation level is generally at a low level for agricultural and commercial banks listed in the Yangtze River Delta. However, judging from more objective overdue indicators, the quality of the company's assets is at a relatively excellent level. It can be said that the company's high non-performing rate stems from a more strict assessment of non-performing loans. As the capital structure improves and market liquidity gradually eases, the factors limiting ROA tend to improve. The company's ROE has tended to decline since reaching an all-time high in 2014, and the overall ROE in the first three quarters of 2019 rebounded to a certain extent. According to this analysis, the decline in ROE is being dragged down more by ROA, and the level of leverage is too high among agricultural and commercial banks. According to DuPont's analysis, the ROA that continued to decline in 15-18 was mainly net interest income, which gradually declined. Weak income also had a certain impact, but the depreciation effect on the cost side was weak, which played a role as a buffer to a certain extent. The horizontal ROA is weaker than that of peers also due to revenue side constraints. However, over the past 19 years, benefiting from adjustments in the balance and liability structure and overall liquidity easing, the company's revenue side's restrictive effect on ROA has gradually improved, leading to an improvement in the downward trend of ROA, and the gap with commercial banks in listed cities has gradually narrowed. Zijin Bank is deeply involved in the mainland of Nanjing, adhering to the market position of “serving the three rural areas, serving small and medium, and urban and rural areas”, sinking deep into the urbanization process in Nanjing through channels, and continuously increasing its penetration rate in the region through multiple means such as grid marketing and technology to acquire customers. Over the past 17 years, the company's business has gradually returned to its roots, and the share of deposits and loans has continued to rise. Under structural optimization and adjustment, the company's performance growth rate has rebounded in 2019, while interest spreads have improved markedly. The company has good cost-side cost control capabilities, strong economic activity in the deep Nanjing region, and stable, moderate, and improving asset quality. In the past, the main reason why the company's ROA was lower than the average of agricultural and commercial banks was weak on the revenue side. As the company's business continues to return to its roots and the structure is optimized and adjusted, the revenue side's supporting effect on ROA will gradually become apparent, and the recovery in ROA will drive the company's ROE to a steady recovery. Investment advice: It is expected that with the gradual adjustment of Zijin Bank's balance and liability structure, benefiting from the strength of the regional economy, performance will continue to grow at a relatively high rate. At the same time, the company has a strict assessment of the bad, the overdue rate is at the low level of agricultural and commercial banks, and the overall asset quality is stable, moderate and improving. Companies 2020E and 202E PB 1.01X/0.94X (Agricultural Commercial Bank 0.84X/0.75X); PE9.35X/8.39X (Agricultural Commercial Bank 7.98X/7.23X). The company's public issuance of no more than 4.5 billion convertible bonds has been approved. It is expected that capital will be consolidated after stock conversion. Investors are advised to pay active attention, cover for the first time, and give it an “increase in holdings” rating. Risk warning events: 1) The development of the epidemic overseas is uncertain. 2) The downward pressure on the domestic economy is still there, and LPR may decline or exceed expectations. 3) Regional risk exposure is concentrated, and the company's asset quality may be under pressure. 4) The company's operations fell short of expectations.