Incident: The Postbank released its 2024 semi-annual report, achieving revenue of 176.8 billion yuan, and profit to mother of 48.8 billion yuan, or -1.5% year-on-year; the non-performing rate was 0.84%, flat month-on-month, and the mid-term dividend ratio has not been determined.

Performance: Revenue and profits are still under pressure, and interest spreads have stabilized marginally

The growth rates of the Postbank's revenue and net profit to mother in the first half of the year were -0.1% and -1.5%, respectively. The growth rates decreased by 1.5pc and 0.2pc from 24Q1, respectively:

1) Net interest income: 1.8% year-on-year increase in the first half of the year, and the net interest spread in the first half of the year was 1.91%, down only 1 bps from month to month. The decline narrowed significantly. Looking at the breakdown:

A. Asset side: Interest rates on interest-bearing assets and loans in the first half of the year fell 16 bps, 24 bps to 3.40%, and 3.89% compared to last year, mainly retail loan interest rates fell 41 bps to 4.37% (it is expected that, on the one hand, Postbank mortgages account was relatively high, and pricing was concentrated at the beginning of the year, and interest rates on new mortgages have also declined a lot. On the other hand, retail demand has been weak since this year, and competition is relatively intense). Interest rates on public loans fell by 9 bps to 3.53%.

B. Debt side: Stock interest rates decreased by 5 bps to 1.48% compared to last year. Among them, interest rates on current and term deposits decreased by 2 bps and 12 bps respectively. The regular share ratio increased by 2 pc (average daily balance) compared to last year, and the trend of regularization is still ongoing.

2) Non-interest income: Net revenue from handling fees and commissions grew at a year-on-year rate of -16.7% in the first half of the year, which is basically in line with the Q1 trend. Mainly due to rate adjustments and capital market fluctuations, agency revenue fell 64% year on year, and bank card and settlement business also declined. Other non-interest net income increased by 1.5% in the first half of the year, and the performance was relatively stable.

3) The cost-revenue ratio (59.9%) increased by about 2.6 pc year on year. Business and management fees increased 4.5% year on year in the first half of the year, faster than revenue growth. Mainly, savings agency fees increased 8.5% year on year due to rapid deposit growth. With subsequent agent rate adjustments (which have triggered adjustment conditions), future cost pressure may be reduced.

Assets and liabilities: The scale has increased steadily, with small and micro loans +10% 1) Asset side: Total assets reached 16.4 billion (+4% compared to the beginning of the year), and loans increased by 136.7 billion yuan to 8.7 trillion yuan in Q2 in a single quarter. Among them, public loans increased by 50.3 billion yuan, notes increased by 40 billion yuan, and retail loans increased by 46.4 billion yuan. Looking at the first half of the year as a whole, of the 217.4 billion retail loan increase, personal microloans (operating loans) increased by 142.8 billion (+10% compared to the beginning of the year), consumer loans and credit cards increased by 47 billion and 4 billion, respectively, and personal housing loans increased by 23.6 billion yuan. All retail categories maintained positive growth.

2) Debt side: At the end of June, deposits reached 14.9 percent, up 7% from the beginning of the year. The total increase in deposits in the first half of the year was 909.1 billion, of which time deposits increased 968.4 billion and demand deposits decreased by 59.8 billion yuan. Mainly, personal demand decreased by 116.5 billion yuan, and personal term deposits increased by 836.9 billion yuan.

Asset quality: Overall stable, bad generation rate continues to decline

1) From a static perspective, the defect rate at the end of June was 0.84%, unchanged from month to month. The attention rate was 0.81%, up 10bps month-on-month, and the overdue rate (1.06%) increased 7bps month-on-month. The non-performing loan ratio decreased slightly by 1 bps to 0.54% compared to the beginning of the year, and the retail non-performing rate increased by 2 bps to 1.14%. Mainly, the operating loan non-performing rate increased by 15 bps to 1.88%. The rest of the retail product categories were basically stable.

2) In terms of dynamics, the bad generation rate disclosed by the company was 0.74%, an improvement of 7 bps over the previous month. Among them, the bad generation rate for public loans decreased by 17 bps to 0.25% compared to the beginning of the year, and retail sales also decreased by 4 bps to 1.22%. Among them, small and micro loans increased by 5 bps to 1.98%.

3) In the first half of the year, the company accrued credit impairment losses of 16.1 billion yuan, a year-on-year reduction of 3.2 billion yuan. Of these, credit was reduced by 1 billion yuan, and non-credit decreased by 2.1 billion yuan over the same period last year. The provision coverage rate at the end of June (326%), the loan ratio was 2.72%, which was basically stable from month to month.

Investment advice: Postbank's performance in the first half of the year was still under pressure under industry trends such as insufficient demand for loans and narrowing interest spreads. However, in the medium to long term, the company has plenty of room for development as a “growing” listed state-owned bank. In terms of scale, the current deposit-to-loan ratio is still low, and it is expected to continue to improve in the future. Furthermore, the asset quality remains steady and excellent, leading the industry, and the margin of safety is high, giving it a “buy” rating.

Risk warning: macroeconomic downturn; consumption recovery falls short of expectations; asset quality deteriorates further.