Incidents:
On April 26, Jiangyin Bank released its 2024 quarterly report. It achieved revenue of 1.06 billion yuan in the first quarter, up 2.6% year on year, and net profit of 350 million yuan, up 12.7% year on year. The weighted average return on net assets (ROAE) was 8.36%, down 0.24pct year over year.
Comment:
Revenue growth has been steady, and profit growth has slowed slightly. Jiangyin Bank's 1Q24 revenue, profit before provision, and net profit to mother grew by 2.6%, 3.1%, and 12.7%, respectively, with year-on-year changes of 0.3, -8, and -4.1 pct, respectively, from 2023.
Among them, the year-on-year growth rates of net interest income and non-interest income were -12.4% and 55.9%, respectively, with changes of -5.8 and 5.3 pcts respectively from 2023. Split profit growth structure: scale expansion and acceleration of non-interest growth are the main contributors, driving performance growth rates of 15.1 and 42.5pct respectively; judging from marginal changes, the main boosting factors include: non-interest, provision, and positive scale contributions; the main drag factors include: narrowing interest spreads dragged on performance growth, and the positive contribution of income tax became negative.
The pace of table expansion has slowed slightly, and the pattern of credit being “strong for the public, weak for retail” continues. The year-on-year growth rates of Jiangyin Bank's interest-bearing assets and loans at the end of 1Q24 were 5.9% and 11.7%, respectively, down 0.4 and 0.2 pct from the end of 2023. In terms of loans, 1Q24 added 5.5 billion dollars in a single quarter, an increase of 400 million over the previous year. The share of interest-bearing assets increased by 2.3 pct to 71% compared to the end of 2023. The “good start” of credit investment during the peak season provided strong support for the expansion of the schedule. At the structural level, sales, and notes added 57, -4, and 300 million respectively during the 1Q quarter, with year-on-year changes of 1.4, -3, and -700 million, respectively. The trend of “strong against the public and weak retail” continued, consistent with the overall situation in the industry. Investment in public loans is still at a high level, and it is expected that industry investment will still be concentrated in manufacturing, approval, etc. On the retail side, there was a decrease of 400 million in the 1Q quarter, lower than the average increase of 800 million yuan for the same period of 2021-2023. Since the beginning of the year, the recovery in consumer consumption and demand for home purchases has been slow, and the growth of the company's mortgage and non-residential consumer loans is expected to be relatively pressured during the quarter. In terms of non-credit assets, financial investment and interbank assets increased by -3.5 billion and 300 million respectively during the 1Q quarter, down 1.7 billion from the previous year, and an increase of 800 million yuan. Together, the two accounted for 29% of the asset side at the end of the quarter, down 2.3 pct from the beginning of the year.
Deposit growth is accelerating, and the trend of regularization is slowing down. The year-on-year growth rates of Jiangyin Bank's interest-paying liabilities and deposits at the end of 1Q24 were 4.7% and 10.7%, respectively, with changes of -5.8 and 0.9 pct respectively from the end of 2023. 1Q single-quarter deposits increased by 8.3 billion yuan, an increase of 1.8 billion yuan over the previous year, accounting for an increase of 5.4 pct to 89.4% over the end of 2023. Looking at terms of term, 1Q fixed term and current deposits increased by 7.7 billion yuan and 1.6 billion respectively, a year-on-year decrease of 800 million dollars and an increase of 2.9 billion yuan. Term deposits at the end of the quarter accounted for 62%, an increase of 1.8 pct over the end of the previous year. By customer type, corporate and personal deposits increased by 2.27 billion dollars respectively during the 1Q quarter, with increases of 1.5 billion and 700 million dollars respectively over the previous year. Personal deposits accounted for 59.4%, an increase of 1.5 pct over the end of 2023. Influenced by factors such as returning home during the Spring Festival, corporate deposits migrated to the residential side, and deposit pricing advantages may provide strong support for the company's 1Q24 deposit growth.
The pressure on NIM narrowing is increasing. The 1Q24 company interest spread was 1.7%, 36 bps narrower than in 2023, and higher than 13 bps in the same period in 1Q23. According to estimates, 1Q24's interest spread was 1.68%, 16 bps narrower than in 2023.
Among them, on the asset side, the company's 1Q24 yield on interest-bearing assets was 3.55%, down 29 bps from 2023. Affected by factors such as insufficient effective demand, increased competition in the industry, lower interest rates on stock mortgages, and rolling repricing of stock loans, 1Q24 asset-side pricing operations were under pressure, in line with industry trends. On the debt side, the 1Q24 interest-paying debt cost was measured at 1.92%, down 15 bps from 2023. It is estimated that debt cost control intensity is high. At the same time, the company's official website shows that interest rates for time deposits were lowered again in March of this year. The reduction ranged from 10-25 bps for different periods. Subsequent debt cost control dividends are expected to be gradually released
The decline in interest rates boosted non-interest income, and its share of revenue rose to 33%. Jiangyin Bank's 1Q24 non-interest revenue was 350 million (YoY +55.9%), accounting for a 10.5pct increase of 33% compared to 2023. Among them, net revenue from handling fees and commissions was 40 million (YoY +155%), mainly contributed by the increase in processing fees for settlement operations during the quarter. Net other non-interest income of 320 million (YoY +49%), accounting for 89% of non-interest income, a decrease of 1.7 cpt from 2023.
Among them, investment income was 170 million (YoY +24%) and fair value change income of 120 million (YoY +121%).
Interest rates in the 1Q24 bond market declined, and the monetization of corporate bond transactions increased investment returns, compounded by increases in financial asset valuations, and jointly drove mid-income growth.
The quality of assets is steady and improving, and the ability to offset risks is strong. At the end of 1Q24, Jiangyin Bank's non-performing rate and attention rate were 0.97% and 0.95%, respectively, down 1 bps and 11 bps from the end of 2023, respectively, and maintained a historically low level of operation.
The non-performing balance increased by $40 million during the 1Q quarter, and the scale of the increase remained the same over the same period last year. Credit impairment losses during the quarter were $440 million, down 0.3 billion from year on year; during the quarter, the share of credit impairment loss/revenue was 41.6%, down 4.1 pct year on year. Asset quality performance was relatively steady, and credit impairment reduced the drag on performance. The company's loan ratio at the end of 1Q was 4.1%, up 9 bps from the beginning of the year, down 0.56 pct from the same period last year; the end-of-quarter provision coverage rate was 425.3%, up 16 pcts from the beginning of the year, and the risk compensation capacity was strong.
The capital adequacy ratio increased at the safe margin. At the end of the quarter, the company's core Tier 1, Tier 1, and capital adequacy ratios were 14.2%, 14.2%, and 15.3%, respectively, up 1.1 pct from the end of the previous year. The company's upfront convertible bonds of 2 billion yuan matured on January 26, 2024, with a total share conversion of 1.39 billion yuan, effectively supplementing the company's core Tier 1 capital. At the same time, the company's profits have maintained double-digit growth, the ability to replenish endogenous capital is strong, and a strong margin of capital safety also provides support for subsequent scale expansion. The risk-weighted asset growth rate at the end of 1Q24 was 5.9%, down 1.9 pct from the end of the previous year. The pace of credit investment slowed down, and the RWA growth rate declined slightly. Since the beginning of the year, some company executives have increased their holdings of the company's shares through debt-for-equity swaps and secondary market transactions. As of April 9, the company's executives had increased their holdings by 937,000 shares, accounting for 0.04% of the share capital. The increase in core staff holdings shows confidence in the company's future development and sends a positive signal.
Profit forecasting, valuation and ratings. Jiangyin Bank is deeply involved in the local market and has a clear geographical advantage. The background of private enterprise shareholders combined with first-class corporate banking qualifications has greatly helped the company to acquire and retain customers on the G+B side. In recent years, the company has promoted the transformation strategy of inclusive retail, focusing on the “inclusive, small, micro, and retail” troika going hand in hand. At the same time, since 2016, the company has actively laid out surrounding markets, and has successively set up three branches in Changzhou, Wuxi and Suzhou to replicate the local small and micro business model. The historical burden of the company's stock continues to fall, new risks are manageable, the pressure of bad generation is low, the margin of capital safety is strong, and there is plenty of room for future expansion. Based on the company's 1Q24 quarterly report, we maintain Jiangyin Bank's 2024-26 EPS forecast of 0.86 yuan, 0.97 yuan, and 1.07 yuan. The PB valuations corresponding to the current stock price are 0.53, 0.48, and 0.43 times, respectively, and the corresponding PE valuations are 4.46, 3.98, and 3.61 times, respectively, maintaining the “increase in holdings” rating.
Risk warning: The economic recovery process fell short of expectations, the decline in the customer base of major state-owned banks intensified, and the decline in interest rates on small and micro loans exceeded expectations.