Event: on August 9, Pudong Development Bank released its 23H1 performance, KuaiBao. The revenue of 23H1 is 91.23 billion yuan, the net profit of YoY-7.5%; is 23.14 billion yuan, the defect rate of YoY-23.3%; is 1.49%, and the provision coverage rate is 170%.
Profit growth is slowing. The cumulative growth rate of 23H1 revenue and net profit of Pudong Development Bank is higher than that of 23Q1-3.7pct and-5.0pct respectively. The main drag may come from the slowdown in credit growth, downward pricing, and increased disposal of non-performing assets, the negative impact of provisions on profits.
The scale is expanding steadily. Total 23H1 assets, total loans and total deposits of Pudong Development Bank are + 5.0%, + 2.0% and + 6.8% respectively compared with the same period last year, which are faster than 23Q1-0.2pct,-0.5pct and-1.3pct respectively. The company's credit growth has slowed since 2021, in part because it focuses on promoting the adjustment and optimization of customers and business structure in the process of optimizing asset quality.
Asset quality continues to improve. The scale and ratio of non-performing loans have "dropped both". The balance of 23H1 non-performing loans of Pudong Development Bank is 74.3 billion yuan, down 1.25 billion yuan compared with 23Q1; the non-performing rate of 23H1 is 1.49%, which is lower than that of 23Q1; the non-performing rate has continued to decline since the end of 2019, and the risk pressure reduction has achieved remarkable results. The provision coverage of 23H1 is higher than that of 23Q1 by 10pct, while that of 23Q1 is higher than that of 23Q1, and the risk offset ability is gradually rising.
The location economy is excellent and the strategic determination is strong. Based on the Yangtze River Delta, Pudong Development Bank has obvious location advantages, strong development momentum, and clear strategy, and continues to promote the construction of "light bank, green bank and panoramic bank". The current risk "controlling the new and reducing the old" may bring phased pressure on performance growth, but at present, asset quality indicators have shown a continuous trend of improvement, and active adjustment of business structure has laid a good foundation for medium-and long-term development.
Investment advice: bad decline, performance bottom
Pudong Development Bank risk management implementation of "controlling the new and reducing the old", the current adverse pressure drop effect is obvious, for the medium-and long-term operation to continuously reduce the burden of asset quality. And the company is based on the Yangtze River Delta, location advantages continue to consolidate, superimposed the current active adjustment of customers, business structure, although the performance is still grinding the bottom, but the management quality and efficiency is expected to be gradually improved. It is estimated that the EPS in 23-25 is 1.42,1.34 and 1.34 yuan respectively, and the closing price on August 9, 2023 corresponds to 0.4 times 23 years PB, maintaining the "recommended" rating.
Risk tips: macroeconomic growth is declining; industry net interest margin is falling faster than expected; credit risk exposure, etc.