Net profit to mother returned to normal levels. The company achieved revenue of 129.8 billion yuan in the first three quarters of 2024, a year-on-year decrease of 2.2%. The decline was slightly narrower by 1.1 percentage points from the first half of the year. Among them, after excluding the impact of the one-time sale of shares invested in Morgan in the same period last year, operating income increased 1.0% year over year. Net profit to mother was 35.2 billion yuan in the first three quarters, up 25.9% year on year. The growth rate was 9.3 percentage points higher than in the first half of the year.

Overall, the company's net profit to mother declined sharply in 2023, and net profit to mother has returned to the previous normal level since this year.

The scale of assets has grown steadily, and the credit structure has been optimized. The company's total assets increased 6.9% year-on-year to 9.42 trillion yuan at the end of the third quarter of 2024, and the growth rate picked up slightly. Among them, deposits increased 5.2% year over year to 5.29 trillion yuan, and total loans increased 9.0% year over year to 5.37 trillion yuan. Among them, the credit structure continues to be optimized. Businesses such as internet loans and credit card cash installments are declining year by year, and dependence on high-risk businesses continues to decline. The core Tier 1 capital adequacy ratio at the end of the third quarter was 8.87%, the same as at the end of the second quarter, down 0.10 percentage points from the beginning of the year.

Net interest spreads decreased slightly from month to month. The average daily net interest spread disclosed by the company for the first three quarters was 1.46%, down 2 bps from the first half of the year, mainly because the average yield on loans declined due to the LPR reduction. At the same time, the trend of long-term and regularization of deposits continued, and the rate of decline in interest rates was lower than on the loan side.

Net income from handling fees has declined, and investment income has increased a lot. The company's net handling fee revenue for the first three quarters fell 8.8% year on year, in line with industry trends. The company took the initiative to seize investment transaction opportunities and actively increased investment income. Other non-interest income increased 13.6% year-on-year in the first three quarters.

The quality of assets is relatively stable, and the ability to offset risks is enhanced. At the end of the third quarter, the company's focus on loans accounted for 2.33%, up 0.03 percentage points from the end of the second quarter, the same as at the beginning of the year; the non-performing loan ratio at the end of the third quarter was 1.38%, down 0.03 percentage points from the end of the second quarter, down 0.10 percentage points from the beginning of the year.

The company's provision coverage rate at the end of the third quarter was 180%, up 5 percentage points from the end of the second quarter and 6 percentage points higher than at the beginning of the year. Overall, the quality of the company's assets is relatively stable, and its ability to offset risks is enhanced.

Investment advice: As stock risk pressure falls, the company's operations gradually improve, and asset investment, non-interest income growth, etc. are slightly better than previously anticipated. We slightly raised our profit forecast. We expect the company's 2024-2026 net profit to mother of 43.6/44.5/45.8 billion yuan (the previous forecast value was 40.4/42.5/45.5 billion yuan), a year-on-year growth rate of 18.8%/2.0%/3.0%; the PE corresponding to the current stock price is 7.7/7.5 /7.2x, PB is 0.46/0.44/0.42x, maintaining a “neutral” rating.