Incident: Bank of Jiangsu announced 2024 1H24 results: achieved revenue of 41.624 billion yuan in the first half of 2024, YoY +7.16%; 2Q24 single-quarter revenue of 20.625 billion yuan, YOY +2.88%. 1H24 net profit to mother was 18.731 billion yuan, YoY +10.05%; 2Q24 net profit to mother in a single quarter was 9.689 billion yuan, YoY +10.08%. The weighted average annualized ROE for the first half of '24 was 16.42%, a year-on-year decrease of 1.78 pcts.

As of the end of June '24, the non-performing loan ratio was 0.89%; the provision coverage rate was 357.20%.

1. Revenue growth slowed in the second quarter, and ROE remained high

Revenue growth slowed in the second quarter, and profit growth was stable. Revenue for the first half of 2024 was 41.624 billion yuan, a revenue growth rate of 7.16%, down 4.56 pcts from 1Q24; revenue for the second quarter was 20.625 billion yuan, a revenue growth rate of 2.88%, down 8.84 pcts from the first quarter, and revenue growth slowed. Net profit to mother grew 10.05% in the first half of the year, slightly up 0.03 pcts from 1Q24; net profit to mother grew 10.08% in the second quarter. Revenue growth slowed in the second quarter, and profit growth was stable.

ROE declined year over year. The weighted average annualized ROE in the first half of 2024 reached 16.42%, a year-on-year decrease of 1.78pcts. ROE declined year-on-year but remained high.

2. Asset quality is good, and provision coverage has declined

Asset quality remains stable. As of the end of June '24, the non-performing loan ratio was 0.89%, down 2BP from 1Q24; the loan ratio was 1.40%, up 3BP from 1Q24; the overdue loan ratio was 1.12%, up 2BP from 1Q24; and asset quality continued to be good. The ratio of non-performing loans to the public real estate industry remained stable at 2.83% in 24Q2.

The provision coverage rate has declined. As of the end of June '24, the provision coverage rate was 357.20%, down 14 pcts from 1Q24, and the level of provision decreased; the loan ratio was 3.18%, down 0.2 pcts from 1Q24.

3. Interest spreads have narrowed slightly, and the size of deposits and loans has grown steadily

The net interest spread narrowed slightly. The net interest spread for 1H24 was 1.90%, down 8BP from 1Q24 and 38BP year-on-year. The return on mainly interest-bearing assets declined significantly. The average return on 1H24 interest-bearing assets was 4.21%, down 24BP year on year; interest payment rate on interest-bearing debt was 2.29%, down 7BP year on year.

The scale of deposits and loans has grown steadily, and business space outside the province has been actively opened up. As of the end of June '24, deposit balances were up 11.52% from '23, and loans were up 8.47% compared to the end of '23. By region, the loan balance of the Jiangsu region was 1.77 trillion yuan, accounting for 86.02%, adding 133 billion yuan of loans from the end of 2023, accounting for a decrease of 0.17 pct; the share of loan balances in the Yangtze River Delta region (excluding Jiangsu) and the Guangdong-Hong Kong-Macao Greater Bay Area increased by 0.1 pct and 0.19 pct respectively.

Investment advice: The Bank of Jiangsu has a good business area, good performance, and low valuation. Profits are expected to continue to grow rapidly in the next few years, wealth management transformation is progressing steadily, and there is plenty of room for valuation improvement. The overall performance growth rate of banks in Jiangsu has remained stable, and asset quality is relatively good. In view of the high operating pressure of the banking industry in 24, the Bank of Jiangsu's revenue growth rate declined. We expect the profit growth rate to be 11.0%/10.5% in 24/25. The current valuation is cost-effective, maintains a highly recommended rating, and gives 0.8 times the 23-year PB target valuation, corresponding to a target price of 9.05 yuan/share.

Risk warning: The economy has declined beyond expectations, asset quality has deteriorated; financial concessions, interest spreads have narrowed, etc.