Performance remained high. The company has previously disclosed rapid performance reports. In the first half of 2024, revenue was 19.3 billion yuan, up 5.4% year on year, up 1.9 percentage points from the first quarter; net profit to mother was 10 billion yuan, up 20.1% year on year, down 1.0 percentage point from the growth rate in the first quarter. The annualized weighted average ROE is 19.5%, an increase of 0.8 percentage points over the previous year, and profitability is at a high level.

Net interest income achieved positive growth, and investment income increased relatively well. The company's net interest income increased by 0.5% in the first half of the year, down 1.9% year-on-year in the first quarter, and net interest income improved. Non-interest income increased 14% year over year, with net handling fee revenue falling 9.9% year over year, mainly due to a good increase in investment income. Non-interest revenue in the first half of the year accounted for 38.1% of revenue, an increase of 3.0 percentage points over the previous year.

Loan growth remained high, and net interest spreads fell 14 bps year over year. Total assets at the end of the period were nearly 2 trillion yuan, up 7.8% from the beginning of the year, and total loans were 0.9 trillion yuan, up 11.7% from the beginning of the year. Among them, corporate loans and retail loans increased by 14.7% and 6.0% compared to the beginning of the year, and the growth rate was at a good level among peers. The growth rate of loans in Hangzhou was slow, but the company increased its loan investment in Zhejiang regions other than Hangzhou. At the end of the period, the share of loans in Zhejiang Province was 78.4%, which was basically the same as at the beginning of the year. Among them, loans from Zhejiang regions other than Hangzhou were 37.4%, an increase of 4.3 percentage points from the beginning of the year.

The company disclosed a net interest spread of 1.42% for the first half of the year, a year-on-year decrease of 14 bps. Among them, the average interest rate for interest-bearing assets was 3.72%, down 21 bps year on year, and loan yield and return on investment decreased by 35 bps and 26 bps, respectively. The average interest rate on interest-bearing debt was 2.21%, down 10 bps from the same period last year. Mainly, the company strengthened deposit cost control, and the deposit interest rate decreased by 15 bps compared to the same period last year.

The company has stepped up bad confirmation and disposal, and the defect rate has remained low; it has reduced provisions to make up for apology. The defect rate at the end of the period was 0.76%, the same as at the end of March. The estimated annualized defect generation rate is 0.62%. Although some defects have been revealed, the company has stepped up its write-off and disposal efforts, and the defective generation rate is still at a low level. In addition, the attention rate of 0.53% and the overdue rate of 0.70% are all at a low level, and the quality of the company's assets has performed well in the industry.

According to the provision plan, credit impairment losses on credit assets increased 38.7% year on year in the first half of the year, but financial investment return losses were about 1.583 billion yuan. As a result, total credit impairment losses fell 26% year on year, making up for the apology.

The end-of-period provision coverage rate was 545%, down 6 percentage points from the end of March, and is still at the top of the industry.

Investment advice: The company's regional economic advantages are obvious, and credit growth continues to rise. We maintain the 2024-2026 net profit forecast of 17.4/20.9/24.4 billion yuan, corresponding to a year-on-year growth rate of 21.1%/20.1%/16.6%.

The current stock price corresponds to the 2024-2026 PE value of 4.5x/3.8x/3.2x, and the PB value is 0.72x/0.62x/0.54x, maintaining the “superior to market” rating.

Risk warning: Macroeconomic recovery falls short of expectations and will drag down the company's net interest spreads and asset quality.