Key points of investment

SPD Bank achieved a high increase in profits, a month-on-month decline in bad performance, and its operating momentum continued to recover.

Overview of the data

SPD Bank's net profit from 24Q1-3 increased 25.9% year on year, and the growth rate increased by 9.2pc from month to month; revenue fell 2.2% year over year, an improvement of 1.0 pc compared to 24H1. SPD Bank's defect rate at the end of 24Q3 was 1.38%, an improvement of 3 bps over the previous month; the provision coverage rate was 180%, an improvement of 5 pc over the previous month.

Achieving a high increase in profits

SPD Bank's net profit from 24Q1-3 increased 25.9% year on year, and the growth rate increased sharply by 9.2pc from month to month; revenue fell 2.2% year over year, and the decline was 1.0 pc better than 24H1, better than market expectations. Looking at the main driving factors: the expansion of scale is accelerating, and the non-interest growth rate is increasing. ① SPD Bank's scale expansion momentum continued to recover. At the end of 24Q3, total assets increased 6.9% year on year, and the growth rate increased 3.3 pc from month to month. Among them, SPD Bank's loans increased rapidly by 9% over the same period last year, and the strategic impact was remarkable. ② 24Q1-3 SPD Bank's other non-interest revenue surged 13.6% year on year. The growth rate improved by 7pc month-on-month, and attributable exchange losses were reduced to increase, supporting profits.

Looking ahead, thanks to continued improvement in operating momentum, although the profit base rebounded at the end of 2023, SPD Bank's profit is expected to continue to grow rapidly throughout 2024.

Interest spreads declined month-on-month

SPD Bank's 24Q3 single-quarter interest spread (early and end of period, same below) decreased by 10bps to 1.34% compared to 24Q2.

(1) Asset-side returns fell 15 bps to 3.37% month-on-month, due to the downward impact of loan interest rates and market interest rates in the industry. (2) The debt-side cost ratio improved by 6 bps to 2.06% month-on-month. Among them, deposit costs improved significantly.

According to SPD Bank's disclosure, the 24Q1-3 parent company's interest rate for caliber deposits decreased by 17 bps year on year, while interest rates for public and retail accounts decreased by 19 and 11 bps, respectively, while interest rates for 24H1 Group's caliber deposits improved by 13 bps year on year, judging that the decline in 24Q3 deposit costs further expanded.

Bad results in double reduction

Looking at stock indicators, SPD Bank's non-performing loan balance fell 1.2% month-on-month, and the non-performing loan ratio fell 3 bps month-on-month at the end of 24Q3, achieving both declines in non-performing loans. In terms of generation indicators, the real bad TTM generation rate in 24Q3 decreased by 27 bps to 1.20% month-on-month, and risk generation pressure improved significantly.

Profit forecasting and valuation

The net profit of SPD Bank is expected to increase 20.43%/1.54%/4.83% year-on-year in 2024-2026, corresponding to BPS22.09/23.04/24.06 yuan. The current price corresponds to 0.45/0.43/0.41 times PB. The target valuation is PB0.60x in 2024, corresponding to the target price of 13.26 yuan, and the current price space is 33%, maintaining the “buy” rating.

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