Key points of investment

Minsheng Bank's interim report performance stabilized, interest spreads improved month-on-month, and fluctuated slightly.

Overview of the data

Minsheng Bank's 24H1 net profit fell 5.5% year on year, and the decline was 0.1 pc narrower than 24Q1; revenue fell 6.2% year over year, and the decline was 0.6 pc narrower than 24Q1. Minsheng Bank's non-performing rate at the end of 24Q2 was 1.47%. The non-performing rate increased by 2 bps to 1.47% compared to 24Q1; the provision coverage rate was 149%, down 0.1 pc from the end of 24Q1.

Performance stabilized month-on-month

① Revenue fell 6.2% year over year, and the decline was 0.6 pc narrower than in 24Q1. The decline in revenue has narrowed, mainly due to the narrowing of the decline in non-interest income due to a lower base. ② Minsheng Bank's net profit from 24H1 fell 5.5% year on year, and the growth rate was basically stable compared to 24Q1. The main reason behind this was the year-on-year improvement in operating costs and taxes, which had an impact on the decline in the contribution of offset values to profits. Looking ahead, it is expected that Minsheng Bank's revenue and profit growth will still be under pressure, mainly due to the slowdown in Minsheng Bank's deposit and loan growth rate. Loans and deposits at the end of 24Q2 were +0.7% and -4.2%, respectively, with growth rates of -3 pc and -5.5 pc month-on-month.

Interest spreads have rebounded slightly

It is estimated that 24Q2 single-quarter interest spreads (earlier-end caliber) increased by 2 bps to 1.36% month-on-month, mainly due to the fact that the improvement in debt costs was greater than the decline in return on assets. ① The return on assets fell 8 bps to 3.53% month-on-month in 24Q2, judging that it was mainly affected by the decline in loan prices. ② The 24Q2 debt cost ratio decreased by 10 bps to 2.29% month-on-month, and the cost improvement was greater than before. Judging that it was mainly affected by interest compensation from governance deposits. Furthermore, it was noted that at the end of 24Q2, Minsheng Bank's corporate current and term deposits all declined compared to the beginning of the year, or that this may also be due to the influence of the regulation of deposit interest compensation, and corporate deposits are under pressure to lose money.

Defective slight fluctuation

① Bad indicators fluctuated. Minsheng Bank's bad rate and attention rate at the end of 24Q2 were +2bp, +15bp to 1.47% and 2.78%, respectively; the overdue rate at the end of 24Q2 increased by 17 bps to 2.18% compared to the beginning of the year; and the 24H1 true bad (including concerns) TTM generation rate increased by 15 bps to 1.19% compared to 2023. The reason for the poor fluctuation was judged to be fluctuations in the quality of retail assets. At the end of 24H1, Minsheng Bank's non-performing ratio for public loans and retail loans decreased by 14 bps and increased by 17 bps to 1.32% and 1.69%, respectively, compared to the beginning of the year. ② The provision remained stable. At the end of 24Q2, Minsheng Bank's provision coverage rate was 149%, which was basically the same level at the end of 24Q1.

Announcement of mid-term dividends

Minsheng Bank announced the 2024 mid-term dividend plan, with a cash dividend of RMB 0.13 per share, with a corresponding dividend ratio of 29.9%. The dividend ratio is basically the same as in 2023 (30.0% in 2023).

Profit forecasting and valuation

Minsheng Bank's net profit is expected to increase by -3.0%/0.0%/0.2% year-on-year in 2024-2026, corresponding to BPS 13.75/15.03/16.34 yuan/share. The current price corresponds to 0.25/0.23/0.21 times the 2024-2026 PB valuation. The target price is 4.13 yuan/share, corresponding to 0.30 times the 24-year PB, and 21% of the current price space, maintaining the “buy” rating.

Risk warning: The macroeconomy has stalled, and bad effects have been greatly exposed.