Core views:
Bank of Jiangyin released its 2014 quarterly report. 24Q1 revenue, PPOP, and net profit to mother increased by 2.6%, 3.1%, and 12.7% year-on-year respectively. The growth rates changed from 23Q4 to -6.3 PCT, -18.6PCT, and -6.3PCT, respectively. The fundamentals declined somewhat in a single quarter (see text for detailed charts).
Highlights: (1) Net interest income declined significantly, but Q1 revenue maintained positive growth. The company's 24Q1 revenue increased 2.6%, slightly up from 23A. Judging from the driving factors, net interest income decreased by 12.4% year on year, but other non-interest income contributions remained high (Q1 growth value was close to 50%), net fee revenue contribution rebounded (net handling fee revenue increased 155% year over year), and revenue growth remained low in single digits. (2) According to Q1, the net interest spread for a single quarter was basically the same, and the performance was better than the disclosed value. The company disclosed that 23A net interest spread was 2.06%, falling back to 1.70% in 24Q1, down 35BP. However, judging from single-quarter estimates, 23Q1-24Q1 estimates net interest spreads of 2.03%, 1.86%, 1.78%, 1.69%, and 1.68%, respectively. The 24Q1 margin is basically the same as 23Q4, which is expected to be related to the spread. Q1 estimates that the return on interest-bearing assets and the cost ratio of interest-bearing debt varied from 23Q4 to -14BP and -14BP, respectively. Maintaining stable interest spreads was mainly due to a sharp decline in debt costs, and the share of deposits in interest-bearing liabilities increased 4.8 PCT to 84.9% month-on-month. (3) Credit investment was good at the beginning of the year, and the slowdown in interest-bearing asset growth was mainly realized in investment assets. Loans at the end of March increased by 5.5 billion yuan compared to the beginning of the year, with a year-on-year increase of 400 million yuan, of which corporate loans increased by 5.7 billion yuan and personal loans decreased by 400 million yuan; interest-bearing assets increased by only 500 million yuan from the beginning of the year, mainly due to investment assets, a decrease of 5.3 billion yuan from the beginning of the year. (4) Asset quality continues to improve. The non-performing loan ratio at the end of March was 0.97%, down 1BP from the end of December; the provision coverage rate at the end of March was 425%, up 15.8PCT from the end of December; concerned that the loan ratio fell 11BP month-on-month to 0.95%; the estimated bad generation rate was 0.48%, down 34 BP from 23Q1 and 92 BP from 23A.
Concern: (1) Investment assets were realized, and other non-interest income increased year-on-year. The company's 24Q1 other non-interest income was $310 million, an increase of nearly 50% over the previous year, with investment income of 170 million yuan, of which the investment income generated by the termination of financial assets measured at amortized cost contributed 90 million yuan.
(2) The new deposit structure is mainly based on individual fixed periods. 24Q1 deposits increased by 8.29 billion yuan, an increase of 1.79 billion yuan over the previous year, of which personal time deposits contributed 8.03 billion yuan, accounting for 97% of new deposits.
Profit forecast and investment suggestions: The company announced a successful conversion of nearly 70% of bonds to shares. At the end of March, the core Tier 1 capital adequacy ratio increased sharply to 14.2%. There is plenty of room for balance sheet improvement. Retail transformation and balance and liability restructuring are expected to systematically improve the company's profitability. Net profit growth in 24/25 is expected to be 10.5%/8.2%, EPS is 0.96/1.04 yuan/share, BVPS is 7.93/8.81 yuan/share, current stock price is 4.0X/3.7X, corresponding 23/24 PE is 4.0X/3.7X, and 23/24 PB is 0.5X/0.4X. The company was given 0.8 times PB for 24 years, corresponding to a reasonable value of 5.13 yuan/share, maintaining a “buy” rating.
Risk warning: (1) Macroeconomics declined more than expected, and asset quality deteriorated sharply. (2) Consumption recovery fell short of expectations, and deposit regularization was serious. (3) Market interest rates are rising, and transaction books are at a loss.