The net profit, revenue, and PPOP of Chongqing Agricultural Commercial Bank in January-September were +3.5%, -1.8%, and +3.8%, respectively. The growth rate was -1.8pct/-0.5pct/-3.0pct in January-June. The mid-term dividend plan has been implemented. It is proposed to pay 0.1,944 yuan per share, with a dividend rate of 30% and an annualized dividend rate of 6.70% (as of 24/10/29). The company's third-quarter results were basically in line with our previous expectations. The main concerns include: 1) optimization of debt costs and narrowing of interest spreads; 2) cost optimization; and 3) poor marginal decline. The company's county layout advantage is stable, retail and BBC ecological strategies are beginning to show results, and A/H shares maintain their holdings increase/purchase ratings.

Credit has grown steadily, and the decline in interest spreads has narrowed

The year-on-year growth rates of total assets, loans, and deposits at the end of September were +4.8%, +5.3%, and +3.5%, respectively, compared with -0.1pct, +0.4pct, and -0.8pct at the end of June. Q3 credit increased by 8.5 billion yuan, of which public, retail, and notes accounted for 60%, 8%, and 32% respectively. Public loans maintained steady growth, and retail loan investment picked up month-on-month. The net interest spread for January-September was 1.61%, -2bp month-on-month. The decline in interest spreads narrowed, or mainly benefited from debt-side contributions. The company's interest-bearing debt cost ratio and deposit cost ratio for January-September declined by 5 bps and 3 bps, respectively. Net interest income for January-September was -6.9% year-on-year, up 1.1 pct from 24H1.

Revenue is under pressure, and costs are optimized

The mid-quarter closing in January-September was -9.7%, and the growth rate was -0.3 pct compared to January-June. The mid-term harvest was still under pressure. Investment income (investment gain+loss from changes in fair value) in January-September was +56.4% year-on-year, and continued to grow rapidly. At the end of September, the core Tier 1 capital adequacy ratio and capital adequacy ratio were the same as at the end of June, -0.02pct to 13.83% and 15.69%, respectively. The capital level was abundant. From January to September, the cost-revenue ratio was 26.9%, and the year-on-year ratio was -4.2pct. The company achieved remarkable results in reducing costs and increasing efficiency, but some of the expenses will be reflected later.

Bad margins have improved, and credit costs have declined

The non-performing rate at the end of September was 1.17%, and the provision coverage rate was 359%. Compared with the end of June, -2bp and -2pct, respectively, the margins of non-performing goods declined. The forward-looking risk index fluctuated slightly, and the estimated annual bad generation rate in 24Q3 was 0.86%, +2bp compared to the previous month. In the process of weak economic recovery, negative effects such as retail operating loans may be generated or there is still upward pressure.

The estimated 24Q3 annualized credit cost was 0.74%, -14 bps year over year, driving profit release. The company's previous large risks have basically been cleared, and the continuous recycling of non-performing assets has fed back profit growth.

Give A/H shares a 25-year target of 0.60/0.45 times

We forecast that the company's net profit for 24-26 will be 11.5/12.2/13.1 billion yuan (previous value 11.5/12.1/12.9 billion yuan), with a year-on-year growth rate of 5.1%/6.3%/7.4%, and a 25-year BVPS forecast of 11.68 yuan, corresponding to 0.50/0.34 times the A/H share. Comparatively, A/H's 25-year Wind unanimously predicted that the average PB value was 0.52/0.30 times, respectively. The company's county layout advantage was stable, and retail and BBC ecological strategies were beginning to show results. They should enjoy a certain valuation premium. They should be given a 25-year A/H target of 0.60/0.45 times, and a target price of 7.01 yuan/5.69 HKD. A/H shares maintain an increase/purchase rating.

Risk warning: Policy promotion fell short of expectations; asset quality deteriorated beyond expectations.