The Bank of Jiangsu maintained double-digit growth in profits and loans in the third quarter, and risk outlook indicators fluctuated slightly.

Overview of the data

The net profit of the Bank of Jiangsu 24Q1-3 increased 10.1% year on year, and the growth rate remained the same as the 24H1 level; revenue increased 6.2% year over year, and the growth rate decreased by 1 pc compared to 24H1. The Bank of Jiangsu had a defect rate of 0.89% at the end of 24Q3, the same as the previous month; the provision coverage rate was 351%, down 6pc from month to month.

The profit growth rate is stable

The net profit of the Bank of Jiangsu 24Q1-3 increased 10.1% year-on-year, and the growth rate remained flat at the 24H1 level. The Bank of Jiangsu's revenue growth slowed slightly. 24Q1-3 revenue increased 6.2% year over year, and the growth rate decreased by 1 pc compared to 24H1. The slowdown in the revenue growth rate of the Bank of Jiangsu was mainly affected by the slowdown in the growth rate of net handling fee revenue. On the one hand, it was affected by the high base of last year's Q3, and on the other hand, it may be related to the pace of processing fee payments. 24Q3 fee expenses grew faster than handling fee revenue. Furthermore, it was noted that the Bank of Jiangsu's 24Q1-3 growth rate of other non-interest income bucked the trend. Judging that the Bank of Jiangsu may have seized the opportunity to allocate more bonds. This foreign exchange profit and loss also achieved a significant increase in the third quarter.

Looking ahead to the whole year, the Bank of Jiangsu's profit growth rate is expected to continue to grow in double digits, mainly considering the low interest spread base in the fourth quarter of last year, and the drag of interest spreads on profits is expected to improve.

High loan growth continues

Bank of Jiangsu loans increased 17% year on year in 24Q3, and the growth rate fell 0.6 pc from month to month. The growth rate was at a high level of listed banks, showing that the credit demand in Jiangsu is resilient, and the Bank of Jiangsu has strong credit investment capacity. Among them, at the end of 24Q3, Bank of Jiangsu's general loans to public sector, bill discounts, retail loans, and overall loans increased by 0.9%, 14.7%, 2.0%, and 2.0%, respectively. Bank of Jiangsu's retail loans increased month-on-month in the third quarter, but by the end of the third quarter, the retail loan balance was still lower than the initial value in 2024, and retail credit demand has yet to recover.

Interest spreads narrowed month-on-month

It is estimated that the Bank of Jiangsu's 24Q3 single-quarter interest spread (initial and final caliber) decreased by 5 bps to 1.71% month-on-month. The judgment was mainly affected by the decline in asset-side returns. ① It is estimated that the return on assets fell 17 bps to 3.94% month-on-month in 24Q3. It was determined that it was mainly affected by the decline in loan interest rates and market interest rates. In addition, the decline in loan share also slightly dragged down return on asset performance. At the end of 24Q3, loans increased 2.0% month-on-month, and the growth rate was 1.7 pc slower than that of interest-bearing assets. ② It is estimated that the 24q3 debt cost ratio decreased by 10bp to 2.17% month-on-month, and determined that the main reason was that deposit interest rate cuts were favorable and that active debt costs gradually improved as market interest rates declined. Looking ahead, interest spreads are still under downward pressure. Mainly considering the reduction in LPR and the reduction in stock mortgage interest rates, which will further drag down return on assets performance.

Defects remain stable

① Bank of Jiangsu's bad performance was stable month-on-month. At the end of 24Q3, the non-performing rate of the Bank of Jiangsu was 0.89%, which was flat month-on-month; the risk outlook index fluctuated, and the Bank of Jiangsu's attention rate was +5bp to 1.45% month-on-month at the end of 24Q3, judging mainly by rising pressure on the quality of retail assets. ② Provisions declined month-on-month. At the end of 24Q3, the Bank of Jiangsu's provision coverage rate decreased by 6pc to 351% month-on-month, and risk compensation capacity was still strong.

Profit forecasting and valuation

Bank of Jiangsu's net profit is expected to increase 10.4%/7.6%/8.1% year-on-year in 2024-2026, corresponding to BPS 12.78/14.03/15.41 yuan/share. The current price corresponds to the 2024-2026 PB valuation of 0.71/0.64/0.59 times. The target price is 11.50 yuan/share, corresponding to 0.90 times PB in 24 years, and the current price space is 27%, maintaining the “buy” rating.

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