Key points of investment

Bank of Ningbo released its 2024 three-quarter report. In the first three quarters, the company achieved revenue of 50.753 billion yuan, +7.45% year-on-year. Achieved net profit of 20.707 billion yuan to mother, +7.02% YoY.

Performance has improved marginally, and interest spread contributions have been corrected

The year-on-year revenue growth rate of 2024Q1-Q3 was slightly +0.31pct compared to 2024H1, mainly due to the impressive performance of the company's interest spread business. 2024Q1-Q3's net interest income was +16.91% year-on-year, and the growth rate was +2.16pct compared to 2024H1. The net profit growth rate of 2024Q1-Q3 company was higher than 2024H1+1.60pct, mainly due to the weakening of net interest spreads and significant cost control results. In terms of performance attribution, the contribution of 2024Q1-Q3 interest-bearing assets, net interest spreads, costs, and provisions to net profit was +14.65%, +2.26%, +6.21%, and -1.60%, respectively. Compared with 2024H1, -1.44pct, +3.60pct, +3.06pct, and -2.19pct, respectively, the net interest margin contribution changed from negative to positive.

Excellent credit structure, improved debt costs

2024Q1-Q3 Bank of Ningbo achieved net interest income of 35.317 billion yuan, +16.91% year over year. The growth rate was higher than 2024H1+2.16pct, and the interest spread business performance was excellent. In terms of credit investment, as of the end of 2024Q3, Bank of Ningbo's loan balance was 1.46 trillion yuan, +19.64% year-on-year, and the growth rate was -0.96pct compared to 2024H1. Looking at the loan structure, the Bank of Ningbo added net new loans of 46.377 billion yuan in a single quarter, a year-on-year decrease of 1.747 billion yuan. 2024Q3 Among them, retail sales and public+discount accounted for 49.23% and 50.77% respectively. Compared with 2024q2+44.56pct, new retail loans accounted for a marked improvement in retail credit investment. In terms of net interest spreads, Bank of Ningbo's net interest spread for the first three quarters was 1.85%. Compared with 2024H1 -2BP, net interest spreads showed strong resilience. Among them, the 2024Q1-Q3 company's return on interest-bearing assets and interest-bearing debt cost ratios were 3.99% and 2.09%, respectively, -6 bps and -3 bps, respectively, compared to 2024H1.

Bad generation pressure is further relieved

From a static perspective, as of the end of 2024Q3, the company's defect rate and attention rate were 0.76% and 1.08%, respectively, compared to +0BP and +6BP at the end of 2024H1, respectively. Attention has increased slightly, and we expect that the repayment capacity of mainly small and micro customers will decline. In terms of dynamics, the company's 2024Q3 annualized bad generation rate was 1.07%, compared to 2024Q2 -9bp, and the pressure of bad generation decreased. In terms of provision, the company's provision coverage rate at the end of 2024Q3 was 404.80%. Compared with -15.75pct at the end of 2024H1, the company's risk compensation capacity is still sufficient. Overall, the company adheres to the concept that “operating a bank is an operating risk”, solidly promotes disposal to mitigate risks in key areas, and has stable asset quality.

Investment advice: maintaining Bank of Ningbo's “buy” rating

We expect the company's revenue for 2024-2026 to be 66.2/72.1/79.9 billion yuan, with year-on-year growth rates of +7.55%/+8.89%/+10.85%, and 3-year CAGR of 9.08%; net profit to mother of 28.2/31.7/35.2 billion yuan, respectively, with year-on-year growth rates of +10.34%/+12.40%/+11.05%, and 3-year CAGR of 11.26%. Given the company's outstanding operational resilience, we maintain a “buy” rating.

Risk warning: Steady growth falls short of expectations, deteriorating asset quality, and regulatory policy shifts.