Event: The company publishes its 2024 semi-annual report. The company achieved operating income of 41.625 billion yuan in the first half of the year, +7.16% year-on-year; net profit to mother was 18.731 billion yuan, +10.05% year-on-year. The weighted average return on net assets (annualized) was 16.42%, -1.78pct year over year. The non-performing loan ratio was 0.89%, the same as at the beginning of the year; the provision coverage rate was 357.20%, -32.33pct compared to the beginning of the year.

Credit investment has increased significantly, and investment in public credit is the main driving force. The company's total assets as of 2024H1, total absorbed deposits, and various loan balances were +10.80%, +11.18%, and +8.47% year-on-year.

The total loan amount increased by 160.408 billion yuan over the end of 2023. The increase was mainly due to increased investment in public credit. The company's 2024H1 public credit balance was 1306.7 billion yuan, up 17.81% from the end of the previous year; the personal loan balance was 634.6 billion yuan, down 2.76% from the end of the previous year.

Profits continued to rise, and the return on investment was excellent. The company achieved net interest income/middle income/other non-interest income +1.8%/+11.3%/+22.3% YoY in the first half of 2024. The company achieved net interest income of 27.656 billion yuan, an increase of 0.479 billion yuan over the previous year, or 1.76%. During the reporting period, the company's profit performance was excellent, mainly due to a year-on-year increase in scale and non-interest income. Among non-interest income, processing fees and commission income were 3.711 billion yuan, an increase of 17.55% over the previous year. Among other non-interest income, the company achieved investment income of 8.084 billion yuan, an increase of 2.201 billion yuan over the previous year, an increase of 37.42%.

The non-performing rate has reached a record low, and the asset quality is excellent and stable. The company's non-performing rate as of the end of June 2024 was 0.89%, a record low. The provision coverage rate was 357.20%, maintaining a high and stable asset safety margin; the ratio of 90-day and 60-day overdue loans to non-performing loans remained low below 100%, at 67.01%/88.47%, respectively. The company's risk control capabilities and asset quality have been steadily improving.

The rate of decline in interest spreads has slowed marginally, and deposit costs have dropped significantly. The company's 24H1 net interest spread was 1.90%, down 8BP from the end of last year, and 38BP narrower than 23H1. On the asset side, yield on interest-bearing assets and loans declined to 4.21% and 4.98% respectively in the first half of the year, down 14BP and 20BP, respectively, from 2023. On the debt side, by reducing interest rates on structured deposits and deposits, the interest-bearing debt and deposit cost ratio fell to 2.29%/2.18% in the first half of the year, down 11 BP/15 BP from 2023, respectively.

Investment and advice: The company's performance in the first half of 2024 was steady, profitability continued to increase, non-performing loan ratio reached a record low, and asset quality was excellent. The company's 2024-2026 revenue is expected to be 79.389, 85.422, 92.699 billion yuan, and realized net profit of 31.286, 34.703, 38.748 billion yuan, and net assets per share of 16.08, 18.09, and 20.29 yuan. The PB corresponding to the closing price on August 26, 2024 is 0.51, 0.45, 0.40 times. Maintain a “buy” rating.

Risk warning: macroeconomic fluctuations, narrowing net interest spreads, deterioration in asset quality