Increase in net profit growth rate: From January to September 2024, the company achieved operating income of 17.241 billion yuan, up 3.23% year on year, and net profit to mother of 9.038 billion yuan, up 10.81% year on year, up 10.81% year on year. The growth rate was up from the first half of the year; the annualized weighted average ROE was 17.55%, down 0.79 percentage points year on year. 2024Q3, revenue and net profit to mother increased by 1.41% and 11.27%, respectively. The company's credit has continued to expand rapidly, interest spreads have stabilized, and asset quality is excellent, supporting steady growth in performance.

Interest spreads stabilized, and public loans continued to grow rapidly: from January to September 2024, the company's net interest income was 13.604 billion yuan, up 1.78% year on year; the 2024Q3 single quarter increased 1.53% year on year, and the growth rate changed from negative to positive compared to the previous quarter. It is expected to benefit from stable marginal interest spreads and steady credit expansion. The company's annualized net interest spread from January to September is estimated to be 1.66%, the same as 2024H1. It is expected that the results of debt cost optimization will gradually be released. As of September 2024, the total amount of the company's loans increased by 15.48% compared to the end of the previous year. The momentum for public loans is still strong, and retail loans are showing good momentum. In September, corporate loans to the public increased by 17.41% compared to the end of the previous year, accounting for an increase of 1.35 percentage points to 81.6% compared to the end of the previous year. Retail loans increased 7.61% from the end of the previous year, up 4.17% month-on-month, and the growth rate has improved quarterly since 2024. By the end of September, the company's various deposits had increased by 12.08% compared to the end of the previous year; the trend of deposit regularization continued. At the end of September, the share of company time deposits increased 2.47 percentage points compared to 2024H1 to 68.49%.

Revenue growth has slowed, and the growth rate is still better than that of peers: from January to September 2024, the company's non-interest revenue was 3.637 billion yuan, up 9% year on year, accounting for 0.55 percentage points lower than in the first half of the year to 21.09%. In January-September, the company's intermediate business revenue was 0.579 billion yuan, up 15.92% year-on-year, and the growth rate was slower than in the first half of the year. The company's other non-interest income was 3.058 billion yuan, up 7.79% year on year; of these, investment income was 3.081 billion yuan, up 20.32% year on year. Affected by exchange rate fluctuations, exchange earnings fell 222.95% year on year, dragging down the company's non-interest income.

Asset quality remains excellent, and risk compensation capacity is solid: as of September 2024, the company's non-performing loan ratio was 0.66%, the same as at the end of the previous year, and remained at the top of the industry; the share of concerned loans was 0.43%, up 2 BP from the end of the previous year, down 2 BP from the previous year, and forward risk was further improved. The company's provision coverage rate was 497.4%, down 6.89 percentage points from the end of the previous year, up 1.38 percentage points from the previous year, and the risk compensation capacity was strengthened. At the end of September 2024, the company's core Tier 1 capital adequacy ratio was 8.4%, up 0.18 percentage points from the end of the previous year.

Investment advice: The company has obvious regional advantages, benefits from the construction of a two-city economic circle between Chengdu and Chongqing, and has broad business development space, which helps drive continuous growth in performance. On the asset side, there is strong momentum for public credit expansion. The moat for government and credit business is obvious, and the asset quality is excellent. On the debt side, deposits are growing rapidly and accounting for a high share. The intermediary business is expected to benefit from the expansion of wealth management needs and diversified revenue channels. Combining the company's fundamentals and stock price flexibility, we maintain a “recommended” rating. The BVPS for 2024-2026 was 19.45 yuan/22.26 yuan/25.39 yuan, corresponding to the current stock price PB of 0.80X/0.70X/0.61X.

Risk warning: Risk of deteriorating asset quality due to the economy falling short of expectations; risk of net interest spreads being pressured by a continued decline in interest rates.