Incident: On August 20, Changshu Bank disclosed its 2024 interim report. 1H24 achieved revenue of 5.506 billion yuan, a year-on-year increase of 12.0%, the same growth rate as 1Q24; 1H24 achieved net profit of 1.734 billion yuan to mother, an increase of 19.6% year-on-year, and a slight decrease of 0.2 pct from 1Q24.

The cost pressure of large-scale expansion has dropped, and performance continues to increase rapidly. Factors contributing to spin-off performance: 1) “Quantitative compensation”, and net interest income forms the basic performance market. In terms of scale, corporate credit growth was steady, and the size of 1H24 interest-bearing assets contributed 15.5 pcts to performance; in terms of price, the negative impact of interest spreads on performance narrowed slightly by 0.5 pct to 9.4%. 2) Investment returns drive high growth in other non-interest rates. 1H24's investment income performance was excellent, and the overall other non-interest income contributed 5.5 pct. 3) Reduce costs and increase efficiency, and optimize costs and expenses to contribute to profits. 1H24 has clearly optimized costs and expenses, contributing 11.1pct positively to performance, mainly due to the improvement of the company's manpower efficiency. 4) Additional provisions affect performance: The negative impact of the 1H24 provision plan on profit increased from 0.1 pct to 4.0 pct.

The public sector supports credit growth, and deposits continue the trend of regularization. The total balance of loans and advances issued by 1H24 was 238.9 billion yuan, up 11.3% year on year. Among them, discounts on public loans, personal loans, and notes increased by 14.0%, 6.9%, and 48.4% year on year, respectively, supporting credit growth for the public sector. The balance of various deposits increased 16.7% year-on-year at the end of 1H24. Among them, personal time deposits increased 26.6%, which became the main driving force for the increase in deposit size.

Asset quality is steady, and there has been a slight increase in poor personal loans. The 1H24 non-performing rate, attention rate, and overdue rate were 0.76%, 1.36%, and 1.54%, respectively, up 1 bps, 12 bps, and 31 bps from the end of 23, respectively. Asset quality fluctuations in the microfinance business under economic pressure affected the performance of forward-looking indicators. The 1H24 provision coverage rate was 539%, the same as at the end of 1Q24. The company continued to make more provisions to further enhance risk offsetting capabilities.

Investment advice: Changshu Bank is deeply involved in the inclusive small and micro customer base, forming a unique “Changnongshang WeChat Loan Model”. It has differentiated competitiveness and leads the industry in performance growth. At the same time, the company has excellent asset quality and sufficient risk compensation capacity, forming a solid foundation, and the company's performance is highly reliable. We expect the company's net profit to be increased by 17.4%, 16.0%, and 15.2% year-on-year in 2024-2026, corresponding to the 2024-2026 PB valuation of 0.67 times, 0.60 times, and 0.54 times, maintaining the “gain” rating.

Risk warning: Economic recovery falls short of expectations, policy strength falls short of expectations, and asset quality has deteriorated.