Revenue growth rebounded marginally in the first three quarters, and net interest spreads continued to improve

China CITIC Bank achieved revenue of 162.2 billion yuan (YoY +3.83%) in the first half of 2024, and the revenue growth rate rebounded marginally.

Looking at the single quarter, Q3 revenue increased 6.27% year on year. Among them, net interest income for the single quarter increased 3.69% year on year, which improved month over month, or mainly contributed to the recovery in net interest spreads. The net interest spread for the first three quarters was 1.79%, up 2 BP from the first half of the year, or mainly due to continued savings in deposit costs after the “manual interest compensation” ban. Net income from processing fees and commissions continued to grow negatively in the first three quarters, but net income from investment grew rapidly, and non-interest income still achieved double-digit growth (YoY +11.17%). The growth rate was slightly higher than in the first half of the year. Net profit to mother was 51.8 billion yuan in the first three quarters of 2024, up 0.76% year on year, up from the first half of the year. Due to continued recovery in interest spreads and improved profitability, we maintain our forecast: 2024-2026 net profit of 68/71.6/77 billion yuan, YoY +1.5%/5.3%/7.7%, respectively; current stock price corresponding to 2024-2026 PB is 0.5/0.4/0.4 times, respectively. Considering the continued improvement in asset quality, we maintain a “buy” rating.

Loan growth is steady, deposits have returned to positive growth, and the difference in deposit and loan growth rates has narrowed

The total assets of 2024Q3 at the end of the year were 9.26 trillion yuan, up 3.78% year on year. Among them, the loan growth rate was 3.05%, which was slightly lower than at the end of the first half of the year. The deposit balance at the end of 2024Q3 was 5.61 trillion yuan, a year-on-year growth rate of 2.80%, reversing the negative growth trend of the previous two quarters, or related to the fact that deposit outflows due to the “manual interest compensation” ban have basically stopped. The difference in deposit and loan growth rate (loan YoY - deposit YoY) narrowed to 0.24%, and the pressure on deposit outflows eased slightly.

The non-performing rate has declined, provision coverage has increased, and capital adequacy ratios have increased at all levels

At the end of 2024Q3, the non-performing rate fell marginally by 2BP to 1.17%, which is a record low; the non-performing loan balance was 65.981 billion yuan, down 1.23% year on year, and the stock risk was basically manageable. The coverage rate at the end of 2024Q3 was 216.00%, up more than 9 pcts from the end of Q2, and the reserve safety pads were significantly thicker. In addition, the core/level/capital adequacy ratios were 9.50%, 11.61%, and 13.78% respectively, all up from the end of Q2. The capital “ammunition” was sufficient, laying a good foundation for business transformation and expansion.

Risk warning: Macroeconomic growth is declining, regulatory policies are being tightened, corporate transformation falls short of expectations, etc.