Incident: On August 16, the Bank of Jiangsu released its 24-year report. 24H1's cumulative revenue was 41.6 billion yuan, YoY +7.2%; net profit to mother 18.7 billion yuan, YoY +10.1%; non-performing rate 0.89%, provision coverage rate 357%.

All segments of revenue showed positive growth. Bank of Jiangsu 24H1 revenue increased 7.2% year on year, down 4.6 pct from 24q1. Mainly, the contribution of other non-interest income to revenue growth declined under the high base, but net interest income and revenue growth rates corrected. 24H1's net interest income, middle income, and other non-interest income were +1.8%, +11.3%, and +22.3% year-on-year, respectively. The growth rates were +2.5pct, +28.1 pct, and -52.6 pct, respectively, compared with 24Q1.

Profit growth increased marginally and continued to maintain a double-digit growth rate. The net profit of the Bank of Jiangsu 24H1 increased 10.1% year-on-year, up 0.1 pct from 24Q1. On the expenditure side, business management expenses increased, with 24H1 cost revenue ratio of 22.4%, up 0.4 pct from 24Q1; the decline in impairment accrual strength was the main factor supporting profit growth. 24H1 asset impairment losses fell 6.3% year on year. Looking at details, it was mainly a decline in provision for the public business sector, and credit impairment losses in the retail business sector increased more year over year.

Public loans have been expanding steadily. 24H1's total assets and total liabilities increased by 14.5% and 13.8%, respectively. The increase in loans in the first half of the year came mainly from counterparties. The discount balances for public loans, personal loans, and notes at the end of 24H1 changed 17.8%, -2.8%, and -14.5% respectively from the beginning of the year. We believe that against the backdrop of fluctuating asset quality, pricing pressure, and weak demand, individual loan investment is slowing down or making rational choices.

Deposit costs have declined significantly, and the decline in net interest spreads has narrowed. The net interest spread of the Bank of Jiangsu 24H1 was 1.90%, down 8BP from 2023 and 38BP compared to 23H1. The decline narrowed markedly. Asset-side returns were mainly dragged down by loan pricing. 24H1 interest-bearing assets and loan yields were 4.21% and 4.98% respectively, down 14BP and 20BP respectively from 2023. On the debt side, the effects of actively reducing structured deposits and lowering deposit listing prices are beginning to show. 24H1 interest-bearing debt and deposit cost ratios were 2.29% and 2.18%, respectively, down 11BP and 15BP from 2023, respectively.

The overall non-performing rate remains stable, and the quality of public assets continues to improve. After accounting for long-term accounts receivable from Suyin Golden Rental, it contributed positively to the company's overall asset quality. Judging from the trend of indicator changes, the defect rate at the end of 24H1 was 0.89%, the same as at the end of 23. Among them, the non-performing ratio of personal loans increased compared to the end of '23. The quality of public assets improved, and the non-performing ratio of loans in the leasing business service sector and manufacturing industry, which account for a large share, declined. Among the forward-looking indicators, the attention rate and overdue rate fluctuated. At the end of 24H1, they were 1.40% and 1.12%, respectively, compared with +8BP and +8BP at the end of 23. The provision coverage rate at the end of 24H1 was 357%, down 32pct from the end of 23, and is still at a good level.

Investment advice: The decline in interest spreads has narrowed, and the scale has grown steadily

The Bank of Jiangsu has benefited from the steady growth of the local economy and industrial infrastructure and maintained a steady growth trend in public business; deposit costs have improved markedly, effectively relieving the downward pressure on interest spreads. It is expected that the impact of lower listing prices will continue to be unleashed, supporting interest spread performance. EPS is expected to be 1.73, 1.90, and 2.10 yuan respectively in 24-26, and the closing price on August 16, 2024 corresponds to 0.6 times 24-year PB, maintaining the “recommended” rating.

Risk warning: Macroeconomic growth is declining; asset quality is deteriorating; the decline in net interest spreads in the industry exceeds expectations.