Sunong Bank's net profit, revenue, and PPOP in January-September were +12.2%, +4.8% year-on-year, respectively. The growth rate was -3.5pct, -3.8pct, and -10.9pct in January-June. The company's profit growth rate for the third quarter was basically in line with our previous expectations (11%-13%). The marginal decline in revenue growth was mainly due to credit restructuring and fluctuations in non-interest income. The company's asset quality trend is stable, capital level is consolidated, development strategy is clear, urban expansion space is broad, and the purchase rating is maintained.

The credit structure has been adjusted, and marginal interest spreads have stabilized

The year-on-year growth rates of total assets, loans, and deposits at the end of September were +4.4%, +4.8%, and +9.5%, respectively, compared with -4.7 pct, -4.0 pct, and -0.8 pct at the end of June. Credit expansion has slowed, mainly due to the company's active pressure on large credit loans. Q3 loans decreased by 3.9 billion yuan, including -4 billion yuan, -0.2 billion yuan, and +0.4 billion yuan for public, retail, and notes respectively. The regional strategy continued to be deepened. At the end of September, Suzhou accounted for 73.9% of loans, an increase of 2.0 pct over the end of 23. We estimate that the company's interest margin stabilized, and the decline in net interest income narrowed. The year-on-year decline in January-September was -4.8%, and the growth rate was 24h1+2.2pct.

The decline in income has narrowed, and the level of capital has been consolidated

The mid-quarter closing in January-September was -18.0% year-on-year. The growth rate was +30.6pct compared to January-June, and the mid-term decline narrowed. January-September investment income (investment gain+loss from changes in fair value) was +50.2% year-on-year, down from the January-June growth rate (+80.4% year-on-year in January-June), or was mainly affected by fluctuations in the bond market. At the end of September, the core Tier 1 capital adequacy ratio and capital adequacy ratio were +0.76pct and +0.65pct respectively to 10.66% and 12.80% at the end of June, and the capital level was consolidated.

The bad trend is stable, and there is a slight decline in reserves

At the end of September, the defect rate was 0.91%, and the provision coverage rate was 430%, which was the same as at the end of June, and -13pct, respectively. The attention rate at the end of September was 1.19%, the same as at the end of June. The poor and attention trend was relatively stable. The provision coverage rate declined slightly but was still at a high level. The estimated 24Q3 annual failure generation rate was 0.41%, -0.26pct month-on-month. Impairment losses of 0.28 billion yuan were calculated in January-September, 19% year-on-year, and impairment losses in Q3 were -0.15 billion yuan, or partial impairment losses were reversed, driving profit release.

Give 25-year target PB 0.60 times

In view of the slowdown in asset growth, we forecast that the company's net profit for 24-26 will be 1.9/2.2/2.4 billion yuan (previous value 2/2.2/2.5 billion yuan), with a year-on-year growth rate of 10.7%/11.6%/12.3%, and a 25-year BVPS forecast value of 10.37 yuan, corresponding to 0.49 times PB. Comparatively, the company's 25-year Wind consistently predicts an average PB of 0.53 times. The company has a clear development strategy and broad room for urban expansion. It should enjoy a certain valuation premium. The 25-year target PB is 0.60 times, the target price is 6.22 yuan, and a purchase rating.

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