The 1-3Q24 revenue and profit growth rate all increased marginally. The interest business was the main driving force 1-3Q24 Bank of Ningbo's revenue and net profit to mother +7.45% and +7.02%, respectively, compared with the 1H24 growth rates of +0.42 and +1.6 pct, respectively. 3Q24 single-quarter revenue and net profit to mother were +8.12% and 10.25% respectively, which were marginal increases from the semi-annual report. Net interest income was +16.91% year-on-year, and the growth rate was higher than 1h24+2.16pcts. The interest business grew steadily for four consecutive quarters.

CCI net revenue was -30.25% year-on-year, and the growth rate was 1h24-5.35pcts. Mainly due to increased handling fee expenses, the growth of the CCI business was still affected by weak demand for wealth management by residents. Other non-interest income remained flat year on year. The growth rate decreased by 2.5 pcts from 1H24. Among them, net income from investment and net income from changes in fair value were -5.67% and 0.38%, respectively. It is expected mainly due to market recovery at the end of September and the impact of fluctuations in the bond market. The cost-revenue ratio was 33.43%, up 0.66 pcts month-on-month from 1H24, and down 3.8 pcts year-on-year. Looking at the cost reduction and efficiency results were good throughout the year. Income tax expenses were +70% year-on-year, mainly due to increased loan write-offs.

High loan growth drove steady expansion. The discount scale decreased by +14.88%, 14.91%, and 20.29% year-on-year respectively compared to 1H24, and Bank of Ningbo's total assets, interest-bearing assets, and loan size increased by +14.88%, and 20.29%, respectively. The third quarter asset scale expansion continued mainly driven by credit growth (vs1H24 increased +16.67%, +16.91%, and +21.19%, respectively). Looking at the loan structure, 3Q24 loans to public (including discounts) and personal loans were +22.46% and 15.2%, respectively. Public and retail sales continued to increase in the third quarter, and the growth rate slowed slightly compared to 1H24. Compared to peers, retail loans performed well, and achieved a high growth rate against the backdrop of the industry generally facing insufficient retail demand. It is expected to be mainly driven by high growth in consumer loans. The discount scale decreased by 14.5 billion compared to 1H24, reflecting a more realistic loan investment structure. The growth rate of the scale of financial investment slowed in the third quarter. The scale of financial investment in 1-3Q24 was +7.03% year-on-year. Among them, the scale of transactional financial assets declined further, -20% compared with the same period last year. It is expected mainly due to Bank of Ningbo optimizing the investment structure of trading book bonds in accordance with changes in the market situation. 1-3Q24 Bank of Ningbo's total liabilities, interest-bearing liabilities, and deposit size increased by 14.97%, 15.34%, and 18.08%, respectively (vs1H24 increased by +16.44%, +16.85%, and +19.21%, respectively). The debt-side growth rate was mainly driven by deposits.

Net interest spreads declined slightly, and interest spreads remained industry-leading in 3Q24, and Bank of Ningbo's net interest spread declined slightly by 2bps to 1.85% month-on-month (interest spread adjustment in Bank of Ningbo's 2024 semi-annual report, excluding interest payment costs corresponding to “investment income” during the holding period of trading financial assets in “interest expenses”. If adjusted according to the new caliber, interest spreads declined by 2 bps to about 2.15%). Interest spread resilience is better than that of peers. It is expected that the decline in yield on interest-bearing assets will be offset to some extent by the decline in debt-side costs. It is expected that in addition to improving the debt-side structure, the reduction in deposit listing interest rates will also provide some support for interest spreads. The Bank of Ningbo is deeply involved in regions with active private economies. Demand for financing is strong, financial institutions are fully competitive, and interest rates on new loans are expected to show a structural recovery ahead of the rest of the country. On the basis of the housing mortgage interest rate reduction in September and the decline in LPR of 25 bps in October, the 4Q24 and 1Q25 interest spreads are expected to face significant downward pressure, but the Bank of Ningbo has a diverse structure at both ends of the balance, and it is expected that the interest spread advantage will be maintained.

The overall quality of assets is stable, and the level of provision has declined slightly

3Q24 Bank of Ningbo's non-performing ratio was 0.76%, which remained flat for 7 consecutive quarters, and asset quality remained stable. The attention rate increased by 6 bps to 1.08% compared to 1H24. It is expected to be mainly due to the impact of the differentiated credit granting strategies of Ningyin Consumer Finance and Retail Big Data Credit Department, but the increase in attention rate was better than 2Q24 (+28 bps month-on-month). Bank of Ningbo's provision coverage rate for 3Q24 was 404.8%, down 15.75pcts from 1H24, and risk offsetting capacity is still ahead of peers. Loan loss preparation was stronger than accrual efforts, leading to a decline in provisions. The 1-3Q24 write-off scale was 10.2 billion, higher than the full year of 2023 (8.3 billion), and the 1-3Q24 accrued loan impairment loss of 9.2 billion. It is expected that risk management efforts will increase mainly due to changes in the internal and external business situation and the Bank of Ningbo focuses on mitigating risks in key areas.

Investment advice

The Bank of Ningbo is deeply involved in Zhejiang and surrounding economically developed regions. It has a clear customer base position and significant competitive advantage in the market segment. The core management team is stable, strategic communication is efficient, and the corporate governance mechanism is difficult to replicate and sustainable. Diversified financial service capabilities are scarce, risk control capabilities are solid, and asset quality remains excellent. The 2024 results were released quarterly, and the company showed good operational resilience in the face of internal and external changes. We expect that under the new round of fiscal and monetary policy, the Bank of Ningbo will benefit from macroeconomic fundamentals restoration and further restoration of fundamentals and valuations. We maintain the profit forecast assumption. We expect the company's revenue to increase 7.85%/6.85%/6.19% year on year in 2024/2025/2026, respectively, and net profit to mother of 10.22%/9.53%/9.06% year on year, respectively, maintaining the “buy” rating.

Risk warning

Interest rate risk: Market interest rates continue to decline, competition for high-quality assets intensifies, and interest spreads narrow.

Market risk: The sharp decline in macro and regional economies has led to a deterioration in asset quality and a sharp increase in defects.

Business risk: Economic growth falls short of expectations, and a sharp drop in financing demand is dragging down credit growth.