Incidents:

The Postbank released its mid-year earnings report for 24 years. The company achieved revenue of 176.8 billion yuan in the first half of the year, YoY -0.11%, net profit to mother 48.8 billion yuan, YoY -1.51%; a non-performing ratio of 0.84%, and a non-performing provision coverage rate of 325.6%.

Review summary:

1. In terms of profit performance:

Net interest income has maintained a positive increase. 24H1 Postbank's revenue was 176.8 billion yuan, a slight decrease of 0.11% year-on-year.

Among them, net interest income of 142.9 billion yuan maintained a positive year-on-year trend, YOY 1.83%. The following is the specific split performance:

Asset return side: The effect of “quantitative price compensation” of credit is remarkable. In the first half of 2024, the average daily credit balance of the Postbank was about 8,449 billion yuan, accounting for an increase of 0.95pct and 0.8pct compared to 23H1 and 2023. Furthermore, due to the impact of the macroeconomic environment and policies, the average yield on loans fell to 3.89%; companies successfully relied on the high base effect to complete “quantitative price compensation”, and 24H1 loan interest income was about 163.3 billion yuan, up 3.26% year on year. Overall, the average yield on interest-bearing assets of the Postbank continued to fall to 3.40%, but the net interest income increased by 3.82% year on year, and the results of “quantitative compensation” were remarkable. Cost side of debt: Cost control frees up space for interest spreads. Postbank 24's overall cost ratio of interest-bearing debt in the first half of the year was 1.51%, and the deposit cost ratio of 96.7% of total interest-bearing debt was released at the beginning of '24, falling to 1.48%. Interest spreads are expected to gradually stabilize. 24H1 corporate net interest spreads declined slightly by 1bp to 1.91%, easing from previous declines.

2. In terms of the balance and liability structure:

Asset side: Loans drive the expansion of interest-bearing assets. The total interest-bearing assets of 24H1 enterprises were 16192.1 billion yuan, up 4.2% from the beginning of the year. Among them, corporate loans, financial investments, interbank transactions, and divestments accounted for 52%, 35%, and 4.9% of interest-bearing assets, respectively. In the split credit performance, it was found that 24Q2 loans to public loans increased by 9.9% compared to the end of 2023. Among them, loan capital investment in infrastructure, manufacturing, real estate, construction, and wholesale and retail sectors increased significantly compared to the end of last year, which were 8.6%, 10.9%, 12.8%, 15.9%, and 19.5%, respectively. Debt side: Both retail and public deposits have grown, and the debt structure is stable. At 24H1, the company's interest-bearing debt balance was 15,293.7 billion yuan, an increase of 4.2% over the end of last year. Of this, about 14861.8 billion yuan was absorbed in 24 years, mainly retail sales. The 24H1 balance was about 13215.2 billion yuan (+5.8% compared to the end of '23), accounting for 86.4% of the total interest-bearing debt. Furthermore, public deposits increased by 188.2 billion yuan, or 12.9%, compared to the end of 2023.

3. In terms of asset quality:

The overall quality of assets is stable, and provisions are maintained at a high level. 24Q2 Postbank's non-performing loan ratio is 0.84%. Judging from the historical trend from 2021 to now, the overall level of bad generation has greatly improved. The 24H1 corporate loan provision rate and the non-performing provision coverage rate were 2.72% and 325.6%, respectively.

Profit Forecast and Valuation:

The main business revenue of Postbank 24H1 increased steadily, the scale expansion performance was active, and the asset quality was excellent. We forecast a year-on-year increase of 0.74%, 1.85%, and 5.38% in 2024-2026, corresponding to current BPS prices: 8.26, 8.75, and 9.64 yuan. Using the dividend discount model, the target price was estimated at 5.93 yuan, corresponding to 0.72 times PB in 24 years, with 31% of the current price space, maintaining a “buy” rating.

Risk warning: Macroeconomic shocks, sharp exposure of non-performing assets, and high pressure on interest spreads.