Event: on October 26, Changsha Bank released its third quarter report of 2023. The company achieved revenue of 18.8 billion yuan in the first three quarters, + 8.44% year-on-year, net profit of 5.84 billion yuan, + 9.21% year-on-year, annualized weighted average ROE of 13.7%, year-on-year-0.16pct, and non-performing loan ratio of 1.16%, unchanged from the end of last year.
Revenue growth declined slightly and profitability was robust. 9M23 achieved revenue of 18.8 billion yuan, yoy+8.44% (3Q23 yoy+1.57%), of which 15 billion yuan of net interest income, yoy+14.6% (3Q23 yoy+10.6%), revenue growth declined slightly, is expected to be mainly affected by the downward spread; 9M23 other non-interest income of 2.39 billion yuan, yoy-23.6% (3Q23 yoy-35.2%), growth decline is mainly due to capital market fluctuations and affected by last year's high base, a drag on revenue growth. 9M23 achieved a net profit of 5.84 billion yuan and yoy+9.21% (3Q23 yoy+6.37%); the weighted average ROE of 9M23 was 10.3% yoymuri 0.12pct, which was still higher than the industry average, and the company's profitability remained robust.
The scale of deposits and loans has maintained growth, joining the camp of trillions of city commercial banks. At the end of 3Q23, the company's total assets were 1.02 trillion yuan, 12.5% higher than at the end of last year, and the strategic goal of "trillion" assets was achieved two years ahead of schedule. It is the first city commercial bank in Hunan with assets exceeding trillion yuan. The company's credit was put into front, and the pace of release was fast in the first half of the year, but slowed down in the third quarter. The total loan at the end of 3Q23 was 488.1 billion yuan, which was + 2.16% and + 14.6% respectively compared with the end of 2Q23 and the end of last year. At the end of 3Q23, total deposits were 644.8 billion yuan, + 2.68% and + 9.40% respectively at the end of 2Q23 and the end of last year, maintaining a trend of steady growth as a whole.
Investment income fell due to the weak performance of the bond market, dragging down non-interest income. 9M23 non-interest income 3.72 billion yuan, yoy-10.9% (3Q23 yoy-28.8%), of which fee and commission net income 1.33 billion yuan, yoy+26.6% (3Q23 yoy-10.8%), the middle income decline is expected to be affected by the poor performance of investment wealth management products, although the growth rate has declined, but the performance is still excellent in the industry. Affected by the weak performance of the bond market in the third quarter and short-term exchange rate fluctuations, changes in investment income and fair value totaled 2.65 billion yuan, yoy-8.94%, exchange profit and loss decreased by 381 million yuan compared with the same period last year, and other non-interest income dragged down revenue.
The defect rate remains at a low level continuously, and the attention rate decreases marginally. At the end of 3Q23, the stock risk of the company continued to clear, and the impairment loss of 3Q23 assets was + 12.4% compared with the same period last year; the non-performing loan ratio was 1.16%, unchanged for five consecutive quarters, the attention rate was 1.63%, month-on-month-1bp, and the overall asset quality remained sound. By the end of 3Q23, the company's provision coverage rate was 311%, which was higher than-1.75pct at the end of 2Q23 and + 0.17pct at the end of last year, and the risk offset ability continued to be good.
Investment advice: give a "recommended" rating for the first time. Changsha Bank is rooted in Hunan Province, where the private economy is active and consumption is booming, and its service network radiates Hunan and Guangdong; the company has fully covered Hunan county, ploughed county finance, developed retail business in an all-round way, and its business scale continues to grow. at the same time, asset quality remains sound.
We forecast that the operating income of 23E/24E/25E is 24.9 billion / 28.1 billion / 31.7 billion yuan respectively, which is 12.9% 12.9% of the same period last year, and the net profit of returning to the home is 7.46 billion / 8.44 billion / 9.53 billion yuan, which is + 9.5% of the same period of last year. On October 30, 2023, the closing price was 7.36 yuan per share, and the PB corresponding to 23E/24E/25E was 0.52, 0.50 and 0.48 times.
Risk hints: the regional economic downturn has led to a surge in bad rates; credit policy has been tightened and credit is limited; and there has been a major shift in industry policy.