Event: The company released its 2024 semi-annual report.

Revenue growth rate improved, and impairment accruals increased: 2024H1, the company achieved operating income and net profit to mother of 34.437 billion yuan and 13.649 billion yuan, up 7.13% and 5.42% year on year, respectively; the annualized weighted average ROE was 14.74%, down 1.41 percentage points year on year. The company's revenue performance improved compared to the first quarter, mainly due to the expansion of the scale of in-memory loans and the increase in net interest income.

The net interest income performance was impressive, the decline in interest spreads narrowed, and deposit and loan growth momentum was strong: 2024H1, the company's net interest income was 23.154 billion yuan, up 14.75% year on year; net interest spread was 1.87%, down 6BP year on year, down 1BP from 2023; adjusted net interest spread was 2.17%, down 14BP year on year; return on interest-bearing assets decreased by 12BP year on year; deposit cost rigidity remained; the average debt cost ratio increased by 2BP. The cost of active debt has all increased. Asset-side credit continues to grow at a high rate, momentum for public business expansion is strong, and retail business remains stable. By the end of June, the company's various loans had increased by 12.5% compared to the beginning of the year, achieving a relatively rapid expansion. Among them, loans to public loans increased by 17.46%; retail loans increased by 3.14% from the beginning of the year, while consumer goods, operating loans and mortgages grew by 3.38%, 1.35%, and 5.65%, respectively. Debt-side deposits have maintained rapid growth, and the degree of regularization has increased cost rigidity. As of the end of June, the company's various deposits increased by 17.63% compared to the beginning of the year. Among them, corporate deposits and residents' deposits increased by 18.02% and 16.53% respectively. The degree of regularization of corporate deposits continued to increase, with a growth rate of 22.48% over the beginning of the year.

Intermediate business revenue was under pressure, and investment income increased slightly: 2024H1, the company's non-interest income was 11.283 billion yuan, a year-on-year decrease of 5.71%. Among them, revenue from the intermediary business was 2.696 billion yuan, down 24.9% year on year, mainly due to the decline in agency business and the decline in revenue from the wealth business. 2024H1, the company's agency business revenue fell 20.2% year over year. The wealth management business is growing steadily. As of the end of June, the company's retail sales were aum1.1 trillion yuan, up 114.2 billion yuan from the beginning of the year, and private aum was 312.2 billion yuan, up 50.4 billion yuan from the beginning of the year. Other non-interest income, which is centered on return on investment, increased slightly. 2024H1, the company's other non-interest income was 8.581 billion yuan, up 2.52% year on year; investment income was 6.333 billion yuan, up 3.53% year on year.

Stable asset quality: As of the end of June, the company's non-performing loan ratio was 0.76%, the same as at the beginning of the year, leading the industry; the non-performing rate in most industries was less than 1%, and the overall risk was manageable, but the non-performing rate for personal consumer loans and operating loans was high; the proportion of concerned loans was 1.02%, up 0.37 percentage points from the beginning of the year; provision coverage rate was 420.55%, maintaining the leading level of the industry and strong risk compensation capacity.

Investment advice: The company is deeply involved in the economically developed regions of the Yangtze River Delta. It has obvious location advantages and outstanding competitiveness in small and micro businesses. At the same time, it also focuses on the development of large retail and light capital businesses, and lays out diversified profit centers, and has been at the forefront of the industry for a long time. The net interest income performance in the company's statement was outstanding, the decline in interest spreads narrowed, deposit and loan growth momentum was strong, and the non-interest business contribution remained leading in the industry. Furthermore, the company has a mature risk control system, excellent asset quality, and sufficient provision. We are optimistic about the company's future development prospects. Combined with the company's fundamentals and stock price flexibility, we maintain the “recommended” rating. 2024-2026 BVPS30.4/34.26/38.57 yuan, corresponding to the current stock price PB0.66X/0.59X/0.52X.

Risk warning: the risk of deteriorating asset quality due to the economy falling short of expectations; the risk that interest rates will continue to decline; the risk that credit growth will slow down due to weakening scale orientation.