Performance review
1H performance meets our expectations
Guiyang Bank announced 1H23 results: revenue and home net profit decreased by 3% and 2% respectively compared with the same period last year. 1H23 annualized ROA and ROE are 0.88% and 10.68% respectively, down 0.10 ppt and 1.26 ppt compared with the same period last year, and the performance is in line with our expectations.
Trend of development
The net interest margin narrowed and the share of time deposits increased. The 1H23 net interest margin of Guiyang Bank was 2.18%, down 18bp from the same period last year and 9bp from 2022, in which the rate of return on interest-bearing assets and the cost ratio of interest-paying liabilities decreased by 16bp and 8bp respectively. On the one hand, the decline in market interest rates and the repricing of stock loans led to a decline in the company's asset-end income; on the other hand, there was a fixed trend in corporate deposits, with an increase in the proportion of high-interest liabilities. At the end of 1H23, demand deposits in Guiyang Bank accounted for 33%, down 3ppt from the end of last year. We estimate that 2Q23 net interest margin is 2.31%, year-on-year, month-on-month decline in 45bp, 2bp, drag down 2Q23 net interest income by 11% year-on-year.
Loans have maintained relatively rapid growth and the scale has expanded steadily. The company's total assets, loans and deposits at the end of 1H23 increased by 6%, 16% and 4% respectively compared with the same period last year, while loans maintained rapid growth. At the end of last year, the company's 1H23 loan increased by 27.2 billion yuan compared with the end of last year. According to the sub-structure, the company, individual and discount loans changed by 21.4 billion yuan,-900 million yuan and 4.1 billion yuan respectively. The loan growth mainly came from the introduction of public credit.
Non-interest income declined compared with the same period last year. Guiyang Bank's 2Q23 net fee income fell 45% year-on-year, while other non-interest income increased 31% year-on-year. In the first half of the year, investment bank fees and financial management fees fell sharply, due to the pressure drop in the scale of non-standard assets and fluctuations in the capital market, respectively.
Pay attention to the landing of the debt plan in Guizhou. The company's 2Q23 end-of-defect rate and the proportion of concern loans are 1.47% and 3.30%, respectively, with month-on-month changes-2bp and 6bp; the company's 2Q23 end-of-provision coverage is 274.5%, increasing 14.2ppt compared with the previous month. The proportion of overdue loans and loans overdue for more than 90 days at the end of the company's 1H23 were 2.91% and 1.44% respectively, down 1.23ppt and 1.22ppt from the end of last year. The company's 1H23 final net defect generation rate was 0.65%, an improvement from 1.49% in the same period last year. We pay attention to the landing of the follow-up debt plan in Guizhou, which may help to promote the expected repair of bank asset quality and valuation.
Profit forecast and valuation
Keep the profit forecast basically unchanged. The current share price corresponds to 0.4 times 2023E price-to-book ratio and 0.3 times 2024E price-to-book ratio. Keep the neutral rating and target price unchanged at 6.15 yuan, corresponding to 0.4 times 2023E price-to-book ratio and 0.4 times 2024E price-to-book ratio, which has 8.5% upside space compared with the current stock price.
Risk
The asset risk is lower than expected, and the regional credit demand is not as expected.