From 24Q1 to 3, the Bank of Ningbo's revenue and profit growth rate all rebounded month-on-month compared to 24H1. The momentum for table expansion was strong, and interest spreads were resilient enough.

Performance Overview

Net profit from Bank of Ningbo 24Q1-3 increased 7.0% year on year, increasing the growth rate by 1.6 pc compared to 24H1; revenue increased 7.4% year over year, and growth rate increased 0.3 pc compared to 24H1. At the end of 24Q3, the defect rate remained flat at 0.76% month-on-month, and the provision coverage rate decreased by 16pc to 405% month-on-month.

Profit growth is picking up

Net profit from Bank of Ningbo 24Q1-3 increased 7.0% year on year, with a growth rate of 1.6 pc higher than 24H1; revenue increased 7.4% year over year, and growth rate increased 0.3 pc over 24H1. The profit growth rate was better than market expectations. Profit growth has rebounded, thanks to improved interest spreads and significant cost control results. It is estimated that the 24Q3 single-quarter interest spread was basically flat at 1.81% month-on-month. The impact of interest spreads on the year-on-year revenue growth rate was 1.3 pc narrower than 24Q2; the 24Q1-3 cost to revenue ratio fell 3.8 pc to 33.4% year on year, and the contribution of cost pressure drop to profit growth increased 3.1 pc month-on-month.

The table expansion has strong kinetic energy

The 24Q3 scale of the Bank of Ningbo continued its high growth trend since the beginning of the year, and the loan structure has been optimized. In 24Q3, interest-bearing assets increased 20.3% year over year, with loans rising 19.6% year over year. By type, the year-on-year growth rates of public loans, retail loans, and notes discounts were 27.4%, 15.2%, and -8.2%, respectively.

Interest spreads are more resilient

It is estimated that Bank of Ningbo's 24Q3 single quarter interest spread (average caliber at the beginning and end of the period) remained flat at 1.81% month-on-month compared to 24Q2. Specifically, 24Q3's return on assets and quarterly debt cost ratio both increased by 1 bps over 24Q2, to 3.91% and 2.05%, respectively. Interest spreads are still quite resilient under the pressure of “asset shortages,” which is not easy.

Adverse Exposures Are Slowing Down

Bank of Ningbo's non-performing rate and attention rate at the end of 24Q3 remained the same as at the end of 24Q2, +7bp to 0.76% and 1.08%, respectively. The attention rate continues to rise, and the judgment is still related to the rise in the retail industry's small and micro risks. The 24Q3 non-performing loan generation rate (TTM) was 1.22%, continuing the upward trend since 23Q2, but it was noted that the 24Q3 non-performing loan generation rate fell 9 bps month-on-month to 1.07%. Judging that Bank of Ningbo's non-performing loans are still in the process of being exposed, there are signs that the rate of exposure is slowing down. The provision coverage rate at the end of 24Q3 was 405%, which is at a high level among listed banks.

Profit forecasting and valuation

Bank of Ningbo's net profit is expected to increase 7.24%/4.54%/4.55% year-on-year in 2024-2026, corresponding to BPS30.86/34.51/38.32 yuan. The target price is 30.86 yuan/share, which is 1.00 times the 2024 PB. As of the close of October 28, 2024, the current price is 25.99 yuan/share. The current price space is 19%, maintaining a “buy” rating.

Risk warning: The macroeconomy has stalled, and bad effects have been greatly exposed.