Pudong Development Bank (600000): Continuing to build a solid foundation

浙商證券 ·  Nov 3, 2023 07:56

Key points of investment

SPD Bank 23Q1-3 continued to strengthen its operating base, and interest spreads bucked the trend and stabilized.

Overview of the data

Pudong Development Bank's 23Q1-3 net profit decreased by 30.8% year over year, an increase of 7.5 pc over 23H1; revenue decreased 7.6% year over year, and the decline was basically the same as 23H1. The non-performing rate of Pudong Development Bank at the end of 23Q3 was 1.52%, up 2 bps from the previous month. The provision coverage rate was 177%, an increase of 7pc over the previous month.

Profitability continues to be under pressure

Pudong Development Bank's 23Q1-3 net profit decreased by 30.8% year on year, an increase of 7.5pc from 23H1; revenue decreased 7.6% year on year, and the decline was basically the same as 23H1, and profit performance continued to be under pressure. Judging from the driving factors, the decline in profit growth is mainly due to the active increase in impairment charges and the consolidation of the business foundation. 23Q1-3 SPD Bank's asset impairment losses increased 5.7% year over year, and the growth rate increased 4.6 pc from 23H1. Looking ahead, it is expected that Pudong Development Bank will continue to strengthen its foundation and promote business transformation, and profit performance will remain marginal pressure.

Interest spreads bucked the trend and stabilized

Pudong Development Bank's 23Q3 net interest spread (early end of a single quarter, same below) bucked the trend and rose slightly by 1 bps to 1.53% month-on-month, attributable to the initial results of the capital burden restructuring.

Looking at the driving factors: (1) Asset side: The yield on interest-bearing assets rose slightly by 2 bps to 3.82% month-on-month, mainly due to improvements in loan structure. In 23Q3, Sueppu Development Bank took the initiative to reduce interest rate on notes discounting. Note discounting at the end of 23Q3 fell 7.7% month-on-month, a decrease of 6.6pc larger than total loans. (2) Debt side: The cost ratio of interest-bearing debt remained flat at 2.28% month-on-month. The judgment was that the active pressure on high-cost deposits was reduced, hedging the impact of deposit regularization. Looking ahead, affected by industry factors such as stock mortgage interest rate cuts, it is expected that there will still be marginal downward pressure on SPD Bank's interest rate spread.

There have been fluctuations in the bad

Pudong Development Bank's bad rate and attention rate at the end of 23Q3 were +2 bp and +19 bp, respectively. The bad indicators fluctuated. The main reason for the judgment: the risk industry upward trend in the real estate and retail sectors, compounded by the implementation of new financial asset classification regulations, has led to stricter adverse assessments.

Profit forecasting and valuation

23Q1-3 SPD Bank consolidated its operating foundation, and interest spreads bucked the trend and stabilized. Net profit from 2023-2025 is expected to increase by -30.45%/0.01%/4.51% year-on-year, corresponding to BPS 20.79/21.61/22.49 yuan. The current price corresponds to the 2023 PB valuation 0.33 times. The target price is 9.06 yuan/share, corresponding to 0.44 times PB in 2023, and the current price space is 31%.

Risk warning: The macroeconomic economy has stalled, and the bad situation has been greatly exposed.

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