Key points of investment:
Incident: On July 17, 2024, SPD Bank issued a board resolution announcing the appointment of Mr. Xie Wei as the company's president, pending approval of his qualifications by the State Administration of Financial Supervision and Administration.
The selection of the new governor has been decided, and the change of core management has been completed
SPD Bank began making core management adjustments in the fourth quarter of last year. At present, the new leadership team has basically been formed. Zhang Weizhong, the current chairman of the company, joined SPD Bank in September 2023. Previously, Chairman Zhang Weizhong worked for China Construction Bank for many years and had rich management experience in the fields of public affairs and inclusive finance business. A number of vice presidents of the company were also recently appointed: in September of last year, Kang Jie, a vice president with a Shanghai state-owned background, took office; in June of this year, the company appointed Ding Wei and Zhang Jian as vice presidents. Now that the new president is selected, the company's core management will stabilize. This is conducive to anchoring and implementing the company's strategy, and the company's business development is expected to be steady and improving.
The new manager is a “veteran” of Pudong Development and has rich business experience
Governor Xie Wei has extensive experience in banking business and has been deeply involved in core banking business areas such as the public sector and the financial market sector for many years. SPD Bank has traditional advantages in public business, and Governor Xie's solid professional ability is expected to better empower the company's development. Furthermore, President Xie has many years of work experience in multiple lines and departments of SPD Bank's general branch, and has been the deputy governor of SPD Bank for more than 8 years. The new governor, who is experienced and familiar with the company's pulse, is expected to push the company's strategy to be implemented and effective more quickly.
New team sets sail to reshape growth momentum
In fact, SPD Bank's new leadership team has been working since the fourth quarter of last year.
Since the establishment of the new team, actions such as the “100 Day Attack” and “Spring Attack” have been launched one after another, focusing on “one investment and three returns” (credit investment, revenue, intermediate income, and settlement), increasing asset investment efforts, and actively reducing risk pressure.
Since 2024, the overall business development of the company has shown a steady and positive trend. 2024Q1's revenue fell 5.7% year on year, and the decline was significantly narrower than in 2023. Excluding the impact of the one-time sale of Morgan shares in the same period of the previous year, operating income increased 3.4% year on year; net profit to mother increased 10.0% year on year, the highest since 2020, ranking first among listed stock companies.
This year is the first year the new team Yang Fan set sail. The company's growth momentum is being reshaped, and the growth trend is expected to improve.
Profit forecasting and investment advice
SPD Bank is at a critical stage of “reversal of the predicament”:
In terms of asset quality, the company insists on “controlling the new and reducing the old”. Defective stocks are close to being cleared, the bad generation rate continues to decline, credit costs have improved marginally, and profit flexibility is expected to be released.
In terms of asset investment, SPD Bank has traditional advantages in public business, and its location has strong economic momentum. The company's core management has been changed and is full of energy. Asset investment efforts have been increased, and the increase in credit asset investment momentum is expected to drive up revenue growth.
In terms of net interest spreads, the company is taking the initiative and working together on the structure and pricing at both ends of the asset balance. The decline in net interest spreads is expected to narrow, and the trend is expected to be superior to comparable peers.
In terms of shareholders, the majority shareholder of SPD Bank is state-owned in Shanghai. On the afternoon of July 16, the Shanghai State-owned Assets Administration Commission held a symposium on market value management, pointing out “making good use of various market value management tools and capital market platforms.” As the flagship financial enterprise in Shanghai, Shanghai's state-owned assets are expected to give more help to the company's business development and market value management.
We forecast the company's revenue growth rates for 2024, 2025, and 2026 to be 0.01%, 4.54%, and 5.45%, respectively, and net profit growth rates to mother of 6.30%, 4.89%, and 5.27%, corresponding ROE of 6.23%, 6.25%, and 6.29%. We maintain the company's 2024 target PB of 0.5 times, corresponding to a target price of 10.9 yuan, and maintain a “buy” rating.
Risk warning
Management stability falls short of expectations; asset quality is repeated; credit investment is not sustainable enough.