The revenue growth rate declined slightly, but the net interest income growth rate improved marginally. As of 24Q3, the cumulative year-on-year growth rates of revenue, PPOP, and net profit of the Chongqing Agricultural Commercial Bank decreased by 0.5 pct, 2.9 pct, and 1.8 pct from 24H1 to -1.8%, 3.6%, and 3.5%, respectively. The decline in net profit growth was greater than revenue, mainly related to the pace of disposal and recovery of non-performing assets (recovering large amounts of non-performing assets in the same period last year, leading to a low impairment loss base). Looking at split revenue, the net interest income growth rate continued to pick up 1.1 pct month-on-month. First, asset investment was steady, and interest spreads narrowed to a limited extent; net handling fee revenue continued to be under pressure, and the growth rate fell 0.3 pct month-on-month; the growth rate of net other non-interest income fell 8.0 pcts month-on-month, but the absolute growth rate was still around 40%.

The marginal increase in loan growth is expected to continue to benefit from regional strategies and the acceleration of debt conversion. As of 24Q3, the total asset growth rate of the Chongqing Agricultural Commercial Bank decreased by 0.1 pct to 4.8% month-on-month, but the growth rate of loans increased 0.4 pct to 5.3% month-on-month, and the growth rate of public and personal loans increased 0.5 pct and 0.4 pct month-on-month respectively. The increase was still mainly due to the public business. Looking ahead, chemical bonds are expected to accelerate markedly, and the investment of government-related assets by the Chongqing Agricultural Commercial Bank is expected to benefit. Interest spreads have narrowed to a limited extent, and the debt cost advantage has been consolidated. The 24Q3 net interest spread of the Chongqing Agricultural Commercial Bank narrowed by 2 bps to 1.61% compared to 24H1. Under the combined effects of the reduction in listed deposit interest rates and debt restructuring, the interest-bearing debt cost ratio and deposit cost ratio declined by 5 bps and 3 bps, respectively, and the debt cost advantage was further consolidated.

The non-performing rate declined month-on-month, and there was plenty of room to feed back profits. As of 24Q3, the non-performing loan ratio of the Chongqing Agricultural Commercial Bank fell 2 bps month-on-month to 1.17%, a new low since 2018. The provision coverage rate fell slightly by 1.7 pct to 358.6% month-on-month, and loans fell 8 bps to 4.20% month-on-month, so there is still plenty of profit margin for back feeding.

The year-on-year growth rate of the company's net profit for 2024/25/26 is 6.3%/5.6%/8.0%, EPS is 1.00/1.06/1.14 yuan, respectively, and BVPS is 10.95/11.75/12.62 yuan (forecast value before maintenance). The current A share price corresponding to 2024/25/26 PB is 0.53/0.49/0.46 times. Comparatively, the 24-year PB adjustment average was 0.60 times, maintaining a 10% valuation premium, giving a 24-year PB 0.66 times PB, a target price of 7.20 yuan/share, and maintaining a “buy” rating.

Risk warning

Economic recovery fell short of expectations; demand for credit fell short of expectations; asset quality deteriorated.