Revenue declined year over year, and net profit maintained positive growth. The company achieved operating income of 69.8 billion yuan in the first half of 2024, down 8.8% year on year. The decline was 0.8 percentage points narrower than in the first quarter; net profit to mother was 24.5 billion yuan in the first half of the year, up 1.7% year on year, and the growth rate rebounded 1.3 percentage points from the first quarter. The weighted average return on net assets for the first half of the year was 9.5%, down 0.6 percentage points year over year. Judging from performance attributions, net interest spreads mainly dragged down net profit growth, while other non-interest income and credit impairment losses supported the net profit growth rate.

The pace of asset expansion has slowed. At the end of the second quarter of 2024, total assets increased 0.6% year-on-year to 6.8 trillion yuan. The asset growth rate continued to decline, and the scale expansion was more cautious. Among them, total loans increased 4.0% year over year, and deposits decreased 5.7% year over year. The company's core Tier 1 capital adequacy ratio at the end of the second quarter was 9.59%, up 0.41 percentage points from the beginning of the year.

Net interest spreads declined. The company disclosed an average daily net interest spread of 1.54% for the first half of the year, a year-on-year decrease of 28 bps. Loan yield fell 51 bps year on year, and yield on interest-bearing assets fell 32 bps year on year. It is expected to be mainly affected by factors such as the decline in LPR and the reduction in interest rates on stock mortgages; debt costs have improved, but the decline is significantly lower than on the asset side. Among them, interest rates on deposits fell 9 bps year on year, and overall debt costs fell 3 bps year on year. On a month-on-month basis, the net interest spread for the first half of this year, which is a relatively simple estimate, fell by 12 bps for the second half of last year.

Investment returns have increased a lot. The company achieved net fee revenue of 10.5 billion yuan in the first half of the year, a year-on-year decrease of 2.9 billion yuan, a decrease of 21.7%. Mainly, bank card service fee revenue decreased by 1.9 billion yuan year-on-year. Other non-interest income of 11.2 billion yuan was achieved in the first half of the year, a significant increase of 33.8% over the previous year, which contributed greatly to the increase in net profit. The main reason was the increase in investment income of 3.3 billion yuan over the same period last year.

Asset quality is under pressure. The company's defect rate at the end of the second quarter was 1.25%, the same as at the beginning of the year; the attention rate was 1.99%, up 15 bps from the beginning of the year; the bad generation rate in the first half of the year was 1.47%, up 12 bps year on year. The provision coverage rate at the end of the second quarter was 172%, down 9 percentage points from the beginning of the year. Overall, the quality of the company's assets is under certain pressure.

Investment advice: We slightly adjust the profit forecast based on the interim report data. The company's net profit for 2024-2026 is expected to be 40.9/41.4/42.6 billion yuan (previous forecast value 38.6/38.7/40.5 billion yuan), a year-on-year growth rate of 0.3/1.1/2.9%; diluted EPS is 0.61/0.62/0.64 yuan; current stock price corresponding PE is 4.7/4.6/4.5x, and PB is 0.36/0.34/0.32x, maintaining a “neutral” rating .

Risk warning: The weakening macroeconomic situation may adversely affect the quality of bank assets.