Event: on October 30, Zijin Bank disclosed 3Q20 performance: revenue 3.503 billion yuan, YoY-2.23%; return to the mother net profit 1.159 billion yuan, YoY + 1.83%; as of the end of September, assets 217.526 billion yuan, an increase of 8.76% over the same period last year; non-performing loan ratio 1.68%, provision coverage rate 242.09%.
Comments:
The growth rate of revenue performance is declining.
3Q20 revenue growth rate of-2.23%, down 4.80% from 1H20, mainly due to the decline in net interest income (YoY-6.7%), net fee income YoY + 22.03%. The profit before provision increased by 0.33%, which was 3.8% lower than that of 1H20; the net profit of 3Q20 was 1.83%, which was 0.1% lower than that of 1H20, and the asset impairment loss was yoy+2.7%.
ROE decreased. The annualized weighted average ROE of 3Q20 was 10.97%, down 71BP from the same period last year.
The net interest margin decreased and the growth rate of deposits and loans increased.
The net interest margin fell. Zijin Bank 3Q20 net interest margin is 1.96%, lower than 1H20 5BP. We estimate that the rate of return on interest-bearing assets of 3Q20 is 4.95% lower than that of 1H20, and the cost ratio of interest-bearing liabilities is higher than 1H20 by 2BP to 2.28%. Due to the recent rise in market interest rates, Zijin Bank accounts for a relatively high proportion of interbank debt, and interest rate spreads are expected to remain under pressure or stabilize in 1H21 in the short term.
The growth rate of deposits and loans increased. The loan size of 3Q20 was 117.818 billion yuan, an increase of 17.13% over the same period last year, an increase of 0.92% over 1H20, and the proportion of interest-bearing assets decreased by 0.63% to 54.13% of 3Q20 deposits of 148.997 billion yuan, an increase of 16.43% over the same period last year, an increase of 4.45% over 1H20, accounting for 74.62% of interest-bearing liabilities.
It is concerned that the loan rate continues to decline and the level of provision continues to decline.
The quality of assets has improved. As of 3Q20, the balance of non-performing loans is 2 billion yuan, and the non-performing loan ratio is 1.68%, which is the same as that of 1H20. The loan ratio is 1.08%, which is lower than that of 1H20. 26BP. The overdue loan rate of 1H20 is 1.55%, down 2BP from the beginning of the year. The write-off of 1H20 non-performing loans totaled 220 million yuan, an increase of 73% over the same period last year. The net non-performing rate of 1H20 was 0.45%, which was lower than that at the beginning of the year (34BP).
The level of provision has dropped. The 3Q20 loan allocation ratio is 4.08%, which is 4BP lower than that of 1H20, and the provision coverage rate is 242.09%, 2.97% lower than that of 1H20.
Investment advice: asset quality has improved, maintaining the "overweight" rating due to the accelerated economic recovery, we maintain Zijin Bank's home net profit growth forecast of 1.5% and 11.4%. Relying on the geographical advantages of Nanjing, the provincial capital, Zijin Bank has accelerated the growth of 3Q20 deposits and loans, and asset quality has continued to improve. Due to the gradual fading of the IPO effect, the target valuation was lowered to 1.1 times 20-year PB, corresponding to the target price of 4.45 yuan per share, maintaining the "overweight" rating.
Risk tips: the epidemic situation has repeatedly led to the deterioration of asset quality; the cost of liabilities has risen sharply; and the economic downturn has exceeded expectations.