The net profit of Changsha Bank in the first three quarters increased by 9.2% compared with the same period last year, and its operating income increased by 8.4% compared with the same period last year. High interest spreads and high-scale growth support interest income by 14.6% compared with the same period last year; fee income increased by 26.6% year-on-year, and other non-interest income was dragged down by the market and base; asset quality indicators were stable, incremental provisions continued to grow rapidly, asset impairment losses increased by 12.4% year-on-year, and stock risk continued to clear. Changsha Bank stock risk continues to clear, operation and management continues to improve, retail, county and other strategies actively promote the positive development of business, positive report performance, continue to be optimistic, core portfolio recommendation, maintain overweight rating.

Support the main points of rating

Income growth remains strong and stock risk continues to clear

The net profit of Changsha Bank in the first three quarters increased by 9.2% compared with the same period last year, which was slightly slower than the medium report, while ROAE13.73%, dropped 16bp compared with the same period last year. The company's operating revenue in the first three quarters increased by 8.4% compared with the same period last year, and the revenue still maintained rapid growth.

Interest income and fee income grew relatively fast: interest income in the first three quarters increased by 14.6% compared with the same period last year. The continued rapid growth in interest income was due to the contribution of relatively rapid growth and the relative advantage of interest spreads. The net interest margin in the first three quarters was 2.34%, a year-on-year decline of 5bp, a relatively small decline. The income from handling fees increased by 26.6% over the same period last year, the growth rate slowed slightly, and the high base continued to grow rapidly. Other non-interest fell 23.6% year-on-year, mainly due to the high base of investment and exchange and the impact of market fluctuations. Incremental provisions continued to grow rapidly, asset impairment losses increased by 12.4% in the first three quarters compared with the same period last year, and stock risks continued to be cleared.

Changsha Bank's quarterly profit and interest income rose 6.4% and 10.6% respectively in the third quarter compared with the same period last year, and the year-on-year growth rate slowed slightly due to the high base in the second quarter.

The growth rate of loans slowed down slightly, while the growth of deposits accelerated.

At the end of the third quarter, the total assets of Changsha Bank increased by 15.8% compared with the same period last year, and loans increased by 15.2% over the same period last year, down 3.4 percentage points from the medium term. On the debt side, deposits increased by 16.3% at the end of the third quarter compared with the same period last year, up 1.7 percentage points from the medium term.

The stock risk is continuously exposed and the stock provision is stable.

The non-performing rate of Changsha Bank at the end of the third quarter was 1.16%, unchanged from the previous quarter. The balance of non-performing loans was 5.66 billion yuan, up 130 million yuan from the previous quarter, while focused loans accounted for 1.63%, down 1bp from the previous quarter. It is estimated that the bad generation rate in a single quarter is 1.37%, and the asset impairment loss is 12.4% higher than the same period last year. The generation is still high, the impairment provision is more, and the stock risk continues to be cleared. The provision coverage rate in the third quarter was 311.26%, down 1.75% from the previous quarter, and the loan ratio was 3.61%, a decrease of 1bp from the previous quarter.

Valuation

According to the three-quarter report, we maintain our profit forecast of 2023 EPS to 1.80 PB 2.08 yuan in 2024, and the current share price is 0.48 times that of 0.52max in 2024, maintaining the overweight rating.

Main risks faced by rating

Overseas fluctuations exceeded expectations and economic downturn exceeded expectations.