Incident: Changshu Bank released its 2024 semi-annual report. In the first half of 2024, Changshu Bank achieved operating income of 5.506 billion yuan, an increase of 0.591 billion yuan over the previous year, or 12.03%. Net profit attributable to the company's shareholders was 1.734 billion yuan, an increase of 0.284 billion yuan over the previous year, or 19.58%.

Comment:

Both revenue and profit achieved relatively rapid growth. In the first half of 2024, Changshu Bank achieved operating income of 5.506 billion yuan, a year-on-year increase of 12.03%; achieved net profit attributable to the company's shareholders of 1.734 billion yuan, an increase of 19.58% year-on-year. The 2024Q2 revenue and net profit growth rate were basically the same as the month-on-month. Return on total assets (ROA) was 1.08%, up 0.04 percentage points year on year; weighted average return on net assets (ROE) was 13.28%, up 0.88 percentage points year over year. The cost-revenue ratio was 35.18%, down 5.85 percentage points from the same period last year, and operating efficiency improved.

Non-interest income is an important support for revenue. 2024H1 net interest revenue was +6.10% year over year, and 2024Q2's growth rate increased month-on-month; non-interest income was +56.59%, the main support for revenue. Among them, net revenue from intermediate business turned a loss into profit driven by high growth in agency business, benefiting from the bullish debt market. Investment income in the first half of the year grew more than 90% year on year; business and management expenses were 1.937 billion yuan, a decrease of 3.93% year on year, which contributed positively to profit growth; impairment losses were +29.86% year-on-year, and provision efforts remained at a high level of profit to a certain extent. growth rate.

The decline in loan yields has narrowed significantly, and deposit costs have declined. In the first half of 2024, Changshu Bank's net spread was 2.63%, down 7 BPs from the beginning of the year; the net interest spread was 2.79%, down 7 bps from the beginning of the year. Among them, the return on interest-bearing assets decreased by 11 BP, and the cost of interest-bearing debt decreased by 4 BP. On the asset side, the loan yield was 5.77%, down only 4 bps from the end of 2023, and the decline narrowed significantly. On the debt side, benefiting from lower deposit interest rates, strict regulatory restrictions on high-interest savings, and the company's continuous optimization of interest-bearing assets, deposit costs improved by 6 bps to 2.22% compared to the end of 2023. The pressure on net interest spreads is a common challenge faced by the entire industry. Changshu Bank's net interest spreads are at a high level in the industry, and there are positive signs that the decline in loan yield is narrowing and deposit costs are improving, and net interest spreads are expected to gradually stabilize.

Asset quality remains stable. At the end of the first half of the year, Changshu Bank's non-performing loan ratio was 0.76%, up 0.01 percentage points from the beginning of the year; the provision coverage rate was 538.81%, up 0.93 percentage points from the beginning of the year, and asset quality remained steady. Compared with the end of 2023, the corporate loan non-performing rate decreased by 14 bps, personal loans were dragged down by credit card loans, the non-performing rate increased, and the real estate non-performing rate continued to improve to 0.76%. The overall risk is manageable.

Investment advice: Maintain a “buy” rating. The overall performance of Changshu Bank's 2024 semi-annual report was impressive. Net revenue and profit maintained a high growth rate, debt-side costs improved, and asset quality remained steady. Changshu Bank's net assets are expected to be 9.47 yuan per share in 2024, and the corresponding PB is 0.72 times the current stock price.

Risk warning: Risk that consumer consumption and corporate investment will fall short of expectations due to economic fluctuations; risk of weakening credit demand and pressure on bank asset quality due to falling short of expectations in real estate; risk that falling market interest rates will cause bank asset-side returns to decline, and net interest spreads will continue to be pressured.