CCB's net profit, operating income, and PPOP in January-September were +0.1%, -3.3%, and -4.2%, respectively. The growth rate was +1.9pct, +0.3pct, and -0.2pct in the first half of the year. The company's third-quarter results were better than our expectations (24Q1-3E net profit/revenue was -1% ~ 0%/-5% ~ -4%, respectively), mainly due to investment earnings growth exceeding expectations. The decline in the company's interest spreads narrowed in the first three quarters, with impressive investment returns, marginal stabilization in revenue growth, and steady asset quality. The company's “new finance” continues to advance, starting a second growth curve, and A/H shares all maintain a “buy” rating.

Scale expansion accelerated, and interest spread reduction narrowed

The growth rates of total assets, loans, and deposits at the end of September were +8.1%, +9.1%, and +2.5%, respectively, compared with +2.8pct, -0.9pct, and -1.5pct at the end of June. The green loan balance at the end of September was 4.58 trillion yuan, up 17.95% from the end of the previous year. The balance of inclusive finance loans was 3.29 trillion yuan, an increase of 248.461 billion yuan over the end of the previous year; the number of inclusive finance loan customers was 3.37 million, an increase of 0.195 million over the end of the previous year. Domestic corporate loans at the end of September were -0.6% month-on-month compared to the end of June, and personal loans were +0.4% month-on-month. The net interest spread for January-September was 1.52%, down 2 bps from 24H1, and the decline in interest spreads narrowed month-on-month. Domestic deposit balance at the end of September was 43.3%, compared to -0.6pct at the end of June.

Investment returns are impressive, and revenue growth has stabilized marginally

Non-interest income from January to September was +6.8% year-on-year, up 4.7 pcts from 24H1. Intermediate business revenue in the first three quarters was -10.3% year-on-year. The growth rate was 24H1+0.9pct, and the mid-revenue growth rate stabilized marginally. 24Q1-3 investment income (net income from investment+net income from changes in fair value) was +85.8% year-on-year, and the growth rate was 20.7pct higher than 24H1. The company stepped up its efforts to dispose of fuying bonds, and the high increase in investment income was the main driver of performance.

Stable asset quality and declining credit costs

The non-performing loan ratio and provision coverage ratio at the end of September were 1.35% and 237%, respectively, the same as at the end of June, -2pct.

Q3 annualized credit costs were 0.34%, year-on-year -0.15pct; Q3 annualized bad generation rate was 0.35%, -0.17pct month-on-month. The company solidly promotes active asset quality control and resolves risks in key areas in a steady and orderly manner.

Annualized ROE and ROA for the first three quarters were -1.02pct and -0.08pct to 11.03% and 0.87%, respectively.

The capital adequacy ratio and core Tier 1 capital adequacy ratio at the end of September were 19.35% and 14.10%, respectively, compared with +0.10pct and +0.09pct at the end of June.

Give A/H shares a 25-year target PB0.75/0.50 times

In view of impressive investment returns, we forecast EPS of 1.33/1.35/1.38 yuan for 24-26 (previous value of 1.31/1.33/1.38 yuan), and forecast a 25-year BVPS of 13.68 yuan, corresponding to A/H 25-year PB0.58/0.41 times. Currently, A/H shares are comparable to the company's 25-year Wind, which is expected to be 0.56/0.41 times PB (2024/10/30). The company's “new finance” continues to advance. We have given A/H shares a 25-year target PB0.75/0.50 times, and the target price for A/H shares is 10.26 yuan/7.45 HKD, all maintaining a “buy” rating.

Risk warning: Policy progress falls short of expectations; economic recovery falls short of expectations.