Introduction to this report:

Jiangyin Bank's overall performance in Q2 was in line with expectations. Revenue growth turned negative but profits remained high. Asset quality fluctuated but reserves were further consolidated. Maintain the target price of 5.62 yuan and maintain the rating for increasing holdings.

Key points of investment:

According to the business situation for the first half of the year, the adjusted net profit growth rate forecast for 2023-2025 is 14.7%, 15.5%, and 15.4%. The corresponding EPS is 0.85 (-0.01), 0.99, and 1.14 yuan/share, and BVPS is 7.29 (+0.02), 8.02 (+0.02), and 8.86 (+0.01) yuan/share. Maintain the target price of 5.62 yuan, corresponding to 0.77 times PB in 2023, and maintain the rating for increasing holdings.

Operations are steady, and revenue growth has turned negative, but profits have remained high. Q2 Revenue fell 1.4% year over year, and the sharp narrowing of interest spreads was a core drag. Although the disclosed cumulative net interest spread for 2023H was 2.20%, up 15 bps from Q1; the estimated Q2 quarterly net interest spread fell 17 bps month-on-month and narrowed by 27 bps year-on-year. Under steady growth in scale, net interest income dragged down 6.7% year-on-year.

Judging from the base figure, the revenue growth rate is expected to rise steadily in the second half of the year. Revenue was negative, but Q2 management expenses and impairment charges also decreased by 5.7% and 0.9%, respectively, driving profit growth higher than Q1.

Deposits and loans maintained a high growth rate, and all achieved a year-on-year increase. Q2 The year-on-year growth rates of deposits and loans were 12.3% and 13.4%, respectively, and the increase was higher than in the same period last year. Structurally, new loans were mainly to the public sector; retail loans reversed the decline in Q1, but were still lower than the balance at the beginning of the year. Among deposits, corporate current deposits grew rapidly, accounting for an increase of 1.5 pct to 19.7% compared to Q1, and the structure was significantly optimized.

The quality of assets has fluctuated, but provisions have been further consolidated. The bad rate and attention rate at the end of Q2 increased by 1 bps, 38 bps to 0.98%, and 1.24%, respectively, compared to the end of Q1, but the provision coverage rate and loan ratio also increased by 19 pct, 26 bps to 500%, and 4.92%, respectively, and remained stable overall.

Risk warning: The intensity of economic recovery is lower than expected, and the customer base is sinking, and credit risk may increase