Steady expansion of credit and improvement of debt cost
January-June net profit, revenue, PPOP + 14.2%, + 1.2%, + 2.8%, compared with January-March + 1.4pct,-2.8pct,-2.3pct. From January to June, ROE and ROA increased from + 0.11pct and + 0.28pct to 0.84% and 8.96%, respectively. In view of the fact that the middle income is under pressure, we forecast EPS0.84/0.93/1.03 yuan in 2023-25 and BVPS in 23 years, corresponding to 0.56 times of PB. Comparable company's 23-year Wind unanimously predicted that the average PB is 0.66 times, the company has obvious regional advantages, and the retail transformation strategy continues to advance, so it should enjoy a certain valuation premium. We give the 23-year target PB 0.70 times, the target price 4.95 yuan, and maintain the "overweight" rating.
Steady growth in scale and marginal increase in interest rate spreads
At the end of June, total assets, loans and deposits were + 9.9%, + 12.3% and + 13.4%, respectively, compared with-1.7pct, + 0.3pct and-0.8pct at the end of March. 23Q2 new loans are mainly to the public, accounting for 77%, 2% and 21% of the public, retail and bills, respectively. The asset structure was optimized, and the proportion of loans at the end of June increased by 2.2pct to 63.6% at the end of March. The net interest margin stabilized and rebounded, with a net interest margin of 2.20% in January-June, compared with January-March + 15bp and 22 years + 2bp, mainly due to lower deposit costs. The deposit cost rate and interest-bearing debt cost rate from January to June are higher than those of 22 years-11bp and-10bp, respectively. The company adopts quota management to effectively reduce the growth of deposits with high interest payment costs. The deposit structure has been continuously optimized, and the demand deposit rate at the end of June is 30.9% higher than that at the end of March + 1.6pct. The rate of return on loans and interest-bearing assets from January to June is higher than that of 22 years-30bp and-6bp respectively.
Non-interest income is picking up, and the middle income is still under pressure.
The company is based on the main responsibility and deeply ploughs the regional market. at the end of June, the balance of agriculture-related and small and micro loans was 100.4 billion yuan, + 8.5% from the beginning of the year, accounting for 89.7% of the bank's loans. Non-interest income from January to June was + 13.8% compared with the same period last year, which was faster than that of + 2.8pct in January-March. Affected by the fluctuations in the capital market, the middle income is still under pressure, with the net income of fees and commissions growing by-41.2% from January to June (compared with the same period in January to March), mainly due to the settlement business fee income-66.9% compared with the same period last year. Investment income from January to June (investment income + fair value change income + exchange earnings) + 29.1% compared with January-March-4.4pct, the increase in investment income from trading financial assets and bond investment income in the current period led to + 143.2% year-on-year investment income.
The provision is thickened and the credit cost is down.
At the end of June, the defective rate and provision coverage rate were 0.98% and 500%, respectively, which were higher than + 1bp and + 19pct at the end of March, which were both at the better level since 2019. The provision pad was thickened and the risk resistance ability was further consolidated.
The attention rate at the end of June is 1.24% higher than that of + 39bp at the end of March, and the potential risk pressure has increased. It is estimated that the annualized non-performing loan generation rate of 23Q2 is 0.52%, which is higher than that of 23Q1-1.09pct. 23Q2 credit cost 1.90%, year-on-year-0.25pct, driving profit release. At the end of June, the capital adequacy ratio and core tier one capital adequacy ratio were 13.74% and 12.59% respectively, compared with-0.35pct and-0.36pct at the end of March.
Risk hint: the economic repair is not as strong as expected, and the deterioration of asset quality is higher than expected.