Events: recently, Suzhou Bank disclosed its third quarterly report for 2023: year-on-year net profit in the first three quarters + 21.36% (2023H1 + 21.00%); operating income + 1.81% (2023H1 + 5.30%); cumulative annualized weighted ROE 13.12% (2023H1 annualized weighted ROE 13.70%), year-on-year + 91bp.
Comments:
Revenue growth has slowed and profit growth continues to rise. In the first three quarters, Suzhou Bank's revenue growth rate compared with the first half of the year-3.49pct to 1.81%; home net profit growth rate compared with the first half of the year + 35bp to 21.36%. The rapid growth of corporate profits is mainly due to the provision back-feeding and scale expansion, which alleviates the downward pressure of interest spreads; the marginal acceleration of profit growth mainly comes from the increased provision back-feeding efforts, which hedges the negative impact of the downward interest spreads.
The net interest margin narrowed month-on-month, and the corporate credit boom was high. The net interest margin of Suzhou Bank fell by 3bp to 1.71 per cent in the first three quarters compared with the first half. According to our estimates, this is caused by a decline in the rate of return on interest-bearing assets and an increase in the cost rate of interest-bearing liabilities. On the asset side, the 18.00% year-on-year increase in total credit at the end of Q3 is mainly due to the rapid growth of public business, compared with the proportion of public loans at the end of Q2 increased by 1bp, and the ratio of loans to interest-bearing assets increased 66bp compared with the end of Q2. On the debt side, the 18.51 per cent year-on-year increase in total deposits was mainly due to a boost in personal deposits, which increased by 1.44pct compared with the end of Q2; deposits as a percentage of interest-bearing liabilities decreased by 78bp compared with the end of Q2.
The defect rate continues to decline and the capital is reasonably abundant. The end-to-end non-performing rate of 2023Q3 fell 2bp to 0.84% from the previous month, the lowest since listing; the proportion of focused loans rose 11bp to 0.84% from the previous month, but is still at a lower level of listed banks. As the ratio of overdue loans to non-performing loans at the end of Q2 is only 67.22%, we believe that the classification of corporate loans is relatively strict, and there is little pressure on the generation of recessive non-performing loans. In addition, Q3 end-of-provision coverage increased 12.28pct to 524.13% month-on-month, the ability to resist risks and back-feed profit space was further enhanced, and asset quality was sound. At the end of Q3, the company's core tier one capital adequacy ratio increased to 9.37% month-on-month, which is still a certain cushion from the regulatory bottom line, and the company still has about 4.999 billion yuan of convertible bonds that have not been converted into shares, and there is still room for capital replenishment.
Profit forecast: Suzhou Bank has outstanding location advantages, solid asset quality and reasonable and abundant capital, taking digital transformation as the "spindle strategy" and gradually realizing the transformation of "quality-driven growth" mode. The company is expected to make progress in stability and improve quality and efficiency. We are optimistic about the future development of the company. It is estimated that the year-on-year growth rate of the company's net profit from 2023 to 2025 is 21.63%, 20.05% and 18.67% respectively.
Risk factors: the economy is falling faster than expected, policies are not as good as expected, and asset quality is significantly deteriorating.