Key investment points: Bank of China's Q2 revenue and profit improved, asset quality remained stable, and we maintained a “superior to the market” rating.

Q2 The growth rate of revenue and profit in a single quarter turned positive. In the first half of 2024, the Bank of China's revenue growth rate was -0.67%, and the net profit growth rate was -1.24%. Among them, Q2's revenue growth rate in the single quarter was 1.87%, and the net profit growth rate in Q2 was 0.29%. Among them, the Q2 spread was 1.44% the same as Q1.

Do a solid job with five major articles. In terms of technology finance, the Bank of China provided a total of 0.0835 million technology enterprises with 1.71 trillion yuan in credit support. In terms of green finance, in 2014, the Bank of China's domestic green credit balance was equivalent to RMB 3665.903 billion, an increase of 39.77% over the previous year. In terms of inclusive finance, the balance of inclusive small and micro enterprise loans (the caliber of the State Financial Supervisory Administration) was 2091.628 billion yuan, an increase of 18.94% over the end of the previous year, higher than the average growth rate of the bank's various loans, and the number of customers exceeded 1.3 million.

Asset quality is stable, moderate and improving. At the end of 4Q2, the company's defect rate remained unchanged compared to 24Q1, at 1.24%. The provision coverage rate was 201.69%, a slight increase from 199.4% in Q1. The Q2 for concerned loans was 1.43%, down 3 bps from 1.46% at the end of 2023.

Investment advice. We forecast EPS of 0.75, 0.79, 0.82 yuan in 2024-2026, and net profit growth rates of 1.12%, 3.84%, and 4.15%. We obtained a reasonable value of 5.43 yuan based on the DDM model; according to the PB-ROE model, the 2024E PB valuation was 0.70 times (0.60 times that of a comparable company), and the corresponding reasonable value was 5.67 yuan. Therefore, the reasonable value range is 5.43-5.67 yuan (corresponding to 2024 PE is 7.24-7.56 times, corresponding PE is 6.04 times for peer 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.