Event: on the evening of October 30, Guiyang Bank disclosed its 3Q20 results: 3Q20 revenue 11.705 billion yuan, YoY + 8.18% YoY 3Q20 return net profit 4.265 billion yuan, YoY-0.96%. By the end of September 20, the assets were 576.24 billion yuan, the non-performing loan ratio was 1.58%, and the loan ratio was 4.73%.
Comments:
Book net profit growth slows down, ROE takes the lead
The growth rate of paper net profit has slowed. 3Q20 revenue grew 8.2%, down 10.5% from 1H20's 18.7%. 3Q20's homed net profit grew by-1%, down 7.6% from 1H20. The decline in performance growth was mainly related to the decline in non-interest income such as handling fees, the increase in fair value changes, and increased provisions. 3Q20's net income from handling fees decreased by 4.8% year-on-year, while provision provision increased by 25.7%.
Profits before 3Q20 provisions grew by 9.6 per cent, a far cry from 1H20's 25.8 per cent.
ROE continues to lead the industry. The annualized weighted average ROE of 3Q20 is 16.09%, down 2.8% from the same period last year, but it is still in the forefront of listed banks with strong profitability.
The growth of assets has slowed down and the spread has improved.
The growth of assets has slowed. 3Q20 assets totaled 576.2 billion yuan, up 4.3 percent year on year, the same as 1H20 and lower than the 11.3 percent growth level at the end of 1919. 3Q20 loans totaled 217.1 billion yuan, up 8.8 percent year on year, down 2.4 percentage points from 1H20 and lagging behind the 20.1 percent growth rate at the end of 1919. The growth rate of loans and assets has continued to slow since 19 years.
The spread has improved. 3Q20 net interest margin 2.50%, month-on-month increase in 6bp, compared with the 19-year increase in 10bp, interest margin improved. Guiyang bank's interbank debt accounts for 34.8% of the total debt. Previously, the improvement of interest rate spreads was greatly affected by the downward trend of interbank deposit rates, and there may be pressure on interest spreads in the next six months.
Stable quality of assets and adequate provision
The quality of assets is stable and there are hidden worries. The non-performing loan ratio of 3Q20 is 1.58%, which is lower than that of 1H20 by 1bp. Compared with the beginning of the year, the asset quality of Q1 company has been greatly affected by the epidemic. The quality of Q2 assets has stabilized, and the quality of Q3 assets has improved month-on-month. 3Q20 pays attention to the loan ratio of 3.02%, which is 28bp higher than that of 1H20. There are hidden worries about asset quality in the future.
There are plenty of provisions. The loan allocation ratio of 3Q20 is 4.73%, which is higher than that of 1H20. 19bp, which has continued to rise in the past three years, has a strong ability to resist risks. The coverage rate of 3Q20 provisions is 300.1%, which is 14.5% higher than that of 1H20, and the provisions are more adequate.
Investment advice: stable asset quality and improved interest rate spreads
Guiyang Bank is based in Guizhou Province, with high interest rate spreads, ROE leading peers, annualized weighted ROE to maintain a high level of A-share listed banks, and strong profitability. 3Q20 asset quality improved month-on-month, Guiyang Bank bad worries caused the market to give its valuation discount, with the positive impact of the new management in place, if the asset quality improves in the future, the valuation will have more room to rise. In order to guard against future risk companies, we have adjusted our 21-year profit growth forecast for 20 PB from 7.2% to-1.2% 11.6%, maintaining a target valuation of 0.8 times the 20-year target valuation, and maintaining an overweight rating corresponding to the share price of 9.42 yuan per share.
Risk tips: the economy of Guizhou Province is declining more than expected, a large number of local financing vehicles default, the epidemic situation continues to worsen, and so on.