Key investment points: Changshu Bank 24H1 revenue increased 12.03% year on year, and net profit to mother increased 19.58% year on year. Net profit to mother increased 19.31% year-on-year in the 24Q2 single quarter. Asset quality remains stable, maintaining a “superior to market” rating.

Revenue and profit growth remained strong. 24Q2 revenue +12.05% YoY, net profit to mother +19.31% YoY. 24H1's revenue was +12.03% year-on-year, and net profit to mother was +19.58% year-on-year, maintaining a relatively rapid growth rate. The 24H1 cost-to-revenue ratio was 35.2%, down 5.85pct from the same period last year. 24H1 annualized ROE increased 0.88pct yoy to 13.28%, and annualized ROA rose 0.04pct yoy to 1.08%.

Asset quality remains stable. The 24Q2 defect rate remained flat at 0.76% month-on-month, a slight increase of 1 bp compared with 23Q4.

Among them, the corporate loan non-performing ratio decreased by 17 bps to 0.66% compared to 23Q4. The company continued to broaden bad disposal channels and speed up risk treatment. The manufacturing and leasing business services sector declined by 18 bps and 55 bps, respectively, compared to 23Q4.

The non-performing personal loan ratio increased by 13 bps to 0.91% compared to 23Q4, and is still under pressure. The 24Q2 provision coverage rate was 538.81%, a slight decrease of 0.37pct from 24Q1, and the risk compensation capacity was sufficient.

The growth rate of deposits and loans slowed month-on-month, and they insisted on their main business. 24Q2 loans were +11.3% YoY, and customer deposits were +17.0% YoY, down from 24Q1. Among them, corporate loans were +14.0% year-on-year, contributing 44.9% to the year-on-year increase in loans. The company adheres to the market position of serving the “three rural areas”, serving small enterprises, and serving small and micro enterprises. The balance of agricultural loans of 24Q2 Company accounted for 65.0%, and the number of agricultural loan accounts for 74.3%. The balance of loans for inclusive small and micro enterprises increased 7.1% from the end of '23.

Investment advice. We forecast EPS of 1.16, 1.28, and 1.44 yuan in 2024-2026, and net profit growth rates of 6.52%, 10.74%, and 11.82%. We obtained a reasonable value of 9.20 yuan based on the DDM model (see Table 2); according to the PB-ROE model, the 2024E PB valuation was 0.90 times (0.49 times that of a comparable company), and the corresponding reasonable value was 8.27 yuan. Therefore, the reasonable value range was 8.27-9.20 yuan (7.14-7.94 times PE for 2024, 4.92 times PE for same industry companies), maintaining the “superior to market” rating.

Risk warning: The solvency of enterprises has declined, asset quality has deteriorated dramatically; financial supervision policies have undergone major changes.