Incident: On October 30, Huaxia Bank disclosed 3Q20 results: revenue of 70.659 billion yuan, YoY +14.19%; net profit of 14.120 billion yuan, YoY -7.37%; as of the end of September 2020, asset size of 3.33 trillion yuan, an increase of 10.26% over the previous year; non-performing loan ratio of 1.88%, provision coverage rate of 157.66%. Comment: Revenue growth rate declined, net profit growth was negative, revenue and PPOP growth rate declined. Revenue grew by 14.19% in 3Q20, down 5.37 percentage points from 1H20, with net interest income YoY +17.90%, net commission income YoY -0.01%, and net non-interest income yoy +3% (down 6.5 pct from 1H20). PPOP increased 20.1% year over year, down 2.37 percentage points from 1H20, and remained at a high level. Net profit of 3Q20 was -7.37%, up 4pct from 1H20, and Huaxia Bank lost 33.926 billion yuan yoy +41.9% in 3Q20 (down 10.5 pct from 1H20). ROE declined. The weighted average ROE for 3Q20 was 5.37%, down 1.99 percentage points from the previous year. Net interest spreads declined month-on-month, deposits and loans grew faster, and net interest spreads were higher. Huaxia Bank's net interest spread was higher. 3Q20 was 2.33%, down 2BP from 1H20. The 3Q20 interest-bearing debt cost ratio was 2.21%, the same as 1H20. The yield on interest-bearing assets in 3Q20 fell 5BP to 4.39% from 1H20, mainly due to the decline in loan yields. Deposits and loans are growing rapidly. As of 3Q20, Huaxia Bank's assets reached 3.33 trillion yuan, up 10.26% year on year, of which loan size was 2.09 trillion yuan, up 14.4% year on year. The share of interest-bearing assets increased 0.40 percentage points from the beginning of the year to 62.74%. Interbank assets are 45.3 billion yuan, YOY -59.1%. The 3Q20 deposit size was 1.87 trillion yuan, up 12.2% year on year. The growth rate was 1.1 pct higher than 1H20, maintaining relatively rapid growth. Asset quality is stable, provision levels have increased, and the non-performing rate remains flat. As of 3Q20, the balance of non-performing loans was 39.393 billion yuan, up 1,017 billion yuan from 1H20; the non-performing loan ratio was 1.88%, the same as 1H20; the loan ratio was 3.51%, up 1BP from 1H20. The 1H20 overdue loan ratio was 1.88%, down 32BP from the beginning of the year. The net bad generation rate of 1H20 was 2.14%, down 41BP from '19. The loan to loan ratio has increased. The 3Q20 loan ratio was 2.97%, up 45BP/27BP respectively from 1Q20 and 1H20; the provision coverage rate was 157.66%, up 19.36/14.42 percentage points from 1Q20 and 1H20, respectively. Investment suggestions: Interest spreads are rising, asset quality is stable, Huaxia Bank's interest spreads remain at a high level, debt costs have advantages over stock banks, and risks are gradually cleared. Due to the obvious economic recovery, we adjusted Huaxia Bank's 20-21 net profit growth forecast from -10.5%/4.9% to -6.4%/7%. Maintain its target valuation of 0.6 times 20-year PB, corresponding to the target price of 8.92 yuan/share, and maintain the “increased holdings” rating. Risk warning: The cost of debt has risen sharply; interest spreads have continued to narrow; and policy tightening has worsened the “asset shortage”.