On August 28, Jiangyin Bank disclosed 1H23 results: operating income of 2.061 billion yuan, YoY+ 1.25%; return to the mother net profit of 656 million yuan, YoY+14.23%; annualized weighted average ROE of 8.96%. By the end of June 23, the asset size was 175.97 billion yuan, the non-performing loan ratio was 0.98%, and the provision coverage rate was 500.21%. The profit growth rate rebounded and ROE rose.

Profits are high and revenue growth is slowing. 1H23 revenue growth was 1.25%, 2.78% lower than 1Q23, revenue growth slowed down; 1H23 annual homed net profit growth rate of 14.23%, 1.45% higher than 1Q23, profit growth picked up.

ROE increased compared with the same period last year. The annualized weighted average ROE of 1H23 is 8.96%, up 0.28% from the same period last year, and the profitability is relatively stable.

2. interest rate spreads rise and the proportion of retail loans decreases.

Interest spreads rise and the cost ratio of interest-bearing liabilities decreases. The net interest margin of 1H23 is 2.20%, which is 15BP higher than 1Q23 and 2BP higher than that of 22 years. The reverse trend of interest margin is higher, mainly due to the decline in the cost ratio of interest-bearing liabilities. The rate of return on 1H23's interest-bearing assets is 4.06%, down 6BP from 2022 and 8BP from the same period last year. The cost rate of interest-bearing debt has declined, and the annual interest-bearing debt cost ratio of 1H23 is 2.08%, which is lower than that of 2022 by 10BP and 10BP compared with the same period last year.

The share of retail loans fell slightly. By the end of June 2023, retail loans accounted for 20.53%, down 0.61% from 23Q1 and 1.75% from the end of last year. By the end of June 2023, the total loan volume was 111.921 billion yuan, with a loan growth rate of 12.3%. The parent company's loan balance for agriculture-related and small and micro enterprises was 100.414 billion yuan, a year-on-year growth rate of 22.4%.

3. The quality of assets is stable and the provision is improved.

The defect rate is stable, and the hidden worries are increased. By the end of June 23, the non-performing loan ratio was 0.98%, up 1BP from the end of March 23 and the same as at the end of 22, and the asset quality was stable. By the end of June 23, the concerned loan rate was 1.24%, up 38bp from the end of March 23; by the end of June 23, the overdue loan rate was 1.46%, an increase of 40BP compared with the end of 22 years.

The level of provision has increased significantly. By the end of June 23, the provision coverage rate was 500.21%, which was 19.14% higher than that at the end of March 23 and 30.59% higher than that at the end of 22 years. By the end of June 23, the loan ratio was 4.92%, an increase of 26BP compared with the end of March 23, and the provision level was significantly higher.

The capital adequacy ratio has declined. By the end of June 23, the core tier 1 / tier 1 / capital adequacy ratio was 12.59%, 12.60% and 13.74% respectively, which was higher than that at the end of March 23-36BP/-36BP/-35BP, and the level of capital adequacy ratio had declined.

Investment suggestion: high dividend yield and outstanding performance-to-price ratio

Jiangyin Bank "Pratt & Whitney, small and Micro, Retail" troika parallel, 1H23 spread rose against the trend, the level of provision increased. We expect the company's 24-year earnings growth to be 15.4% and 14.6%, giving it a target valuation of 0.66 times 23e Pbinb. Corresponding to 4.78 yuan per share, maintain the "highly recommended" rating.

Risk tips: declining exports, economic stall affecting asset quality, policy changes, sharp narrowing of industry interest spreads, and so on.