Performance growth has slowed slightly. In the first three quarters of 2024, revenue was 28.49 billion yuan, up 3.87% year on year, and net profit to mother was 13.87 billion yuan, up 18.63% year on year. Among them, single-quarter revenue for the third quarter increased by 0.86% year on year, and net profit to mother increased 15.10% year on year. The growth rate was slower than in the first half of the year.

The slowdown in revenue growth in the third quarter was mainly dragged down by a decline in non-interest income. In the first three quarters, the company's net interest income increased 3.9% year on year, non-interest income increased 3.9% year on year, net interest income in the third quarter increased 11.0% year on year, and non-interest income decreased 16.2% year on year. Among them, handling fees and commission income continued to decline slightly, while other non-interest income, such as investment income, fell by about 20% year-on-year in the third quarter due to increased market fluctuations.

The scale has maintained a good expansion, and the net interest spread is expected to stabilize. Total assets at the end of the period were 2.02 trillion yuan, up 9.58% from the beginning of the year, and total loans were 0.91 trillion yuan, up 12.77% from the beginning of the year. Among them, public loans and retail loans increased 15.8% and 7.0% respectively from the beginning of the year. In an environment where demand for credit in the industry is weak, the company's public and retail credit has expanded relatively well. This is due to the development of the regional economy in Zhejiang Province. While the company is deeply involved in the Hangzhou region, it is actively increasing credit expansion outside of Hangzhou.

In the face of steady expansion in scale, net interest income in a single quarter increased 11.0% year on year in the third quarter. We expect the company's net interest spread is likely to have stabilized, and the drag effect of the year-on-year narrowing of net interest spreads has weakened.

Based on the balance at the beginning and end of the period, the company's cumulative annualized net interest spread for the first three quarters was 1.29%, which is basically the same as in the first half of the year.

The quality of assets is excellent, and there are sufficient provisions to feed back profits. The defect rate at the end of the period was 0.76%, the same as at the end of June; the attention rate was 0.59%, up 6 bps from the end of June, all at a low level. According to the provision plan, credit impairment losses fell 27.5% year-on-year in the first three quarters, but provision coverage at the end of the period was 543%, down 2 percentage points from the end of June, and remained stable at a high level. We believe that the risk impairment calculation of the company's credit assets has remained stable, but asset losses on non-credit assets such as financial investments have declined sharply.

Investment advice: The company's regional economic advantages are obvious, the scale continues to grow well, the asset quality is excellent, and the performance is at the top of the industry. We maintain the 2024-2026 net profit forecast of 17.4/20.9/24.4 billion yuan, corresponding to a year-on-year growth rate of 21.1%/20.1%/16.6%. The current stock price corresponds to the 2024-2026 PE value of 4.9x/4.1x/3.5x, and the PB value is 0.79x/0.68x/0.59x, maintaining the “superior to market” rating.

Risk warning: Macroeconomic recovery falls short of expectations and will drag down the company's net interest spreads and asset quality.