Net revenue and profit for the first half of the year both declined year over year. The company achieved revenue of 132.347 billion yuan (YoY, -3.51%) in the first half of the year, and achieved net profit of 45.287 billion yuan (YoY, -1.63%). Among them, revenue of 65.288 billion yuan (YoY, -6.83%) was achieved in the second quarter, and net profit to mother was 20.299 billion yuan (YoY, -5.17%). The company's revenue growth rate in the first half of the year was 3.5 pct narrower than in the first quarter, and the growth rate of net profit to mother was 3.1 pct narrower than in the first quarter. The company's annualized weighted average ROE in the first half of the year was 9.29%, a year-on-year decrease of 0.87 pct.

The asset growth rate has slowed slightly, which has reduced the pressure on capital relatively. The company's total assets increased 2.64% year-on-year to 14.18 trillion yuan in the first half of the year, and the growth rate slowed slightly. On the asset side, loans increased 6.05% year-on-year to 8.27 trillion yuan in the first half of the year. A total of 310.6 billion yuan of new credit was invested in the first half of the year. In terms of items, 271.9/82.7/-43.9 billion yuan was invested in public/personal/bill loans respectively, up 6.16%/6.47%/5.78% year-on-year respectively, and the growth rate was relatively stable. The slowdown in the company's asset growth rate relatively reduced endogenous pressure on capital. At the end of June, the company's core Tier 1 capital adequacy ratio rebounded slightly by 0.07 pct to 10.30% from the beginning of the year.

The net interest spread for the first half of the year was 1.29%, which paid off in reducing debt costs. The net interest spread disclosed by the company in the first half of the year was 1.29%, down 2 bps year on year, mainly due to the rapid decline in customer loan yields. On the asset side, yield on interest-bearing assets fell 16 bps year on year to 3.48% in the first half of the year, with loan yield falling 34 bps year on year. On the debt side, the average cost ratio of interest-bearing debt fell 9 bps to 2.36% year on year in the first half of the year. Among them, the deposit cost ratio fell 14 bps year on year, and the company achieved results in reducing debt costs.

Net interest income grew steadily, and non-interest income declined year over year. The company's net interest income in the first half of the year increased 2.24% year on year to 84.234 billion yuan; net income from handling fees and commissions decreased 14.56% year on year, mainly due to large fluctuations in revenue from agency, investment banking and bank card businesses; investment income and fair value change income fell 9.38% year on year, mainly affected by the rising valuation base after individual equity IPOs in the same period last year, and subsidiary equity investment income declined a lot.

The overall quality of assets remains stable. Our estimate of the company's bad generation rate in the first half of the year was 0.49%, which is low. The company's non-performing loan ratio at the end of the second quarter was 1.32%, the same as at the end of the first quarter; the provision coverage rate was 204.82%, up 7.77pct from the end of the first quarter. The attention rate at the end of the second quarter was 1.66%, up 0.15pct from the beginning of the year. Overall, the quality of the company's assets has remained stable.

Investment advice: The company's overall fundamental performance is relatively stable. We slightly lowered the company's profit forecast. The company's net profit for 2024-2026 is 89.7/91.9/97.7 billion yuan, corresponding to a year-on-year growth rate of -3.3%/2.5%/6.4%; diluted EPS is 1.11/1.14/1.22 yuan; PE corresponding to the current stock price is 7.3/7.1/6.6x, and PB is 0.62/0.58/0.55x, maintaining a “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.