Bank of Xi'an's policy dividends are outstanding, strengthening retail and deepening regional industry finance, which is expected to inject new momentum into the company's sustainable development. Maintain the “Overweight” rating. Matters: The Bank of Xi'an released its 2020 interim report. Operating income and net profit for the first half of the year were the same as -0.8% and +1.1% respectively; the non-performing rate for the second quarter remained flat at 1.17% month-on-month. The margin of profit factors slowed in the second quarter. The company's net profit for the first half of the year was +1.1% year-on-year (+10.1% year-on-year in the first quarter). On the division side, revenue was -0.8% year-on-year (+3.6% in the first quarter), and interest spreads and other non-interest income were relatively stable. 2) On the expenditure side, under cost control, the cost-to-revenue ratio for the first half of the year decreased by 0.79pct to 23.65% year on year; provision plans for the second quarter also accelerated, with asset impairment losses in the first half of the year being +6.9% year-on-year (+2.9% year-on-year in the first quarter). The expansion of the exchange rate accelerated, which had an impact on weakening interest spreads. 1) The scale growth rate in the second quarter accelerated: total assets were +15.17 billion yuan (+5.4%), and the quarterly increase was the highest value in recent years. The quarter's credit assets (+6.6 billion), AC investment assets (+5.9 billion), and interbank assets (+4.5 billion) all increased significantly, while the debt side mainly consolidated the foundation through deposits (+20.7 billion); 2) Pricing weakened. The company's net interest difference in the first half of the year was 2.09%, down 17 bps from last year. The net interest difference for the first half of the year was estimated to be down 17bps from last year. Fee income improved marginally, and rising market interest rates in the second quarter limited investment business. The company's non-interest income in the first half of the year was -22.4% year-on-year. Looking at the breakdown: 1) Q2 fees and commission net income rebounded: the year-on-year growth rate in the single quarter had rebounded to 3.1% (-27.9% in the first quarter). Relatively speaking, retail income recovered significantly faster (agency business revenue and bank card fees were +35.7%/+20.6% year-on-year respectively); 2) Changes in fair value in the second quarter weakened. Against the backdrop of rising interest rates in the bond market in June, changes in the company's fair value recorded a loss of 230 million dollars, thus increasing other non-interest income in the first half of the year. The speed weakened to -29.5% 。 The book quality is stable. In the second quarter, the company's non-performing loan balance increased by 80 million yuan. The non-performing ratio remained the same as 1.54% in the previous quarter, and the overall quality of book assets was stable. However, looking at forward-looking indicators, the first half of the year focused on the loan ratio and expected loan ratio were +0.22pct/0.36pct respectively compared to the beginning of the year. The changes in the quality of broadly problematic assets in subsequent quarters are worth paying attention to. Furthermore, the company has clearly stepped up disposal efforts. The scale of write-off in the first half of the year was 310 million yuan, which is close to the level of last year's full year (330 million). In terms of provisions, in the second quarter, the company moderately stepped up its provision and planning efforts, and asset impairment losses in the first half of the year were +6.9% year-on-year (+2.9% year-on-year in the first quarter). At the end of the year, the company's provision coverage rate was 268%, up nearly 6 pcts from the beginning of the year. Risk factors: macroeconomic growth has stalled and declined; asset quality has deteriorated beyond expectations. Investment suggestions: Bank of Xi'an's policy dividends are outstanding, strengthening retail and deepening regional industry finance, which is expected to inject new momentum into the company's sustainable development. Considering that the company's provisions were slightly higher than expected, the company's 2020/21 EPS forecast was slightly adjusted to 0.61/0.65 yuan (the original forecast was 0.65/0.72 yuan). The current valuation corresponds to 0.97 xPb in 2020, maintaining the “increased holdings” rating.