Both revenue and net profit grew positively in the first half of the year. The company achieved revenue of 13.917 billion yuan (YoY ,0.23%) and net profit to mother of 6.971 billion yuan (YoY ,0.62%) in the first half of 2024. Among them, revenue of 6.832 billion yuan was achieved in the second quarter, down 6.82 percentage points from the first quarter; net profit to mother was 3.419 billion yuan, down 1.73 percentage points from the first quarter. The company's annualized weighted average ROE for the first half of 2024 was 11.89%, a year-on-year decrease of 1.18 percentage points.

Assets maintained steady growth, and the mid-term dividend rate increased to 33%. The company's total assets increased 7.02% year-on-year to 1.45 trillion yuan in the first half of 2024, and the growth rate was relatively steady. Among them, deposits increased 6.93% year on year in the first half of the year, maintaining steady growth; loans increased 6.18% year on year in the first half of the year. The company's core Tier 1 capital adequacy ratio at the end of the first half of the year was 14.68%, and the mid-term dividend ratio increased to 33.07%, an increase of about 3 percentage points over 2023.

Net interest spreads narrowed year over year, and debt advantage strengthened. Net interest income for the first half of 2024 fell 2.61% year on year, mainly due to factors such as the decline in LPR. The net interest spread disclosed by the company was 1.56% for the first half of the year, down 16 bps year on year, mainly affected by the decline in yield on interest-bearing assets. On the asset side, loan yield fell 45 bps year on year in the first half of the year, and yield on interest-bearing assets fell 26 bps year on year; on the debt side, deposit costs fell 15 bps year on year in the first half of the year, and the average cost ratio of interest-bearing debt fell 9 bps year on year, strengthening the debt advantage.

Other non-interest income grew rapidly, mainly driven by income from financial investment. Net non-interest income increased 8.86% year over year in the first half of the year. Among them, net income from handling fees decreased by 17.39% year on year; net income from other non-interest increased 29.41% year over year, and investment income and income from changes in fair value increased 9.67% year on year, mainly driven by financial investment income.

Asset quality remains stable. Our estimated bad generation rate for the first half of 2024 increased slightly by 0.18 percentage points year over year to 0.74%. At the same time, the company stepped up its bad write-off and disposal efforts. At the end of June, the non-performing loan ratio was 0.97%, down 2 bps from the beginning of the year; the attention rate was 1.23%, down 4 bps from the beginning of the year, the same as at the beginning of the year; the provision coverage rate was 372.42%, down 32.56 percentage points from the beginning of the year. The quality of the company's assets remains stable.

Investment advice: The overall performance of the company's fundamentals is relatively stable. We expect the company's net profit to be 12.9/14/15.1 billion yuan in 2024-2026, corresponding to a year-on-year growth rate of 6.5%/7.9%/8.2%; diluted EPS is 1.34/1.45/1.57 yuan; PE corresponding to the current stock price is 4.9/4.5/4.2x, and PB is 0.52/0.48/0.44x, maintaining” “Neutral” rating.

Risk warning: The weakening macroeconomic situation may adversely affect the quality of bank assets.