Incident: Rui Fung Bank announced its 2024 three-quarter report. 24Q1-Q3 achieved revenue of 3.3 billion yuan, a year-on-year growth rate of 14.7%, and net profit to mother of 1.4 billion yuan, a year-on-year growth rate of 14.6%. By the end of 24Q3, the company's defect rate and provision coverage rate were 0.97% and 329.96% respectively, which remained flat and increased by 6.2 pc compared to the end of 24Q2.

1. Performance: The year-on-year decline in interest spreads narrowed

The year-on-year growth rates of 24Q1-Q3 Ruifeng Bank's revenue and net profit to mother were 14.7% and 14.6%, respectively, down 0.2 pc and 0.8 pc from the 24H1 growth rate. The performance growth rate remained in double digits, mainly due to narrowing interest spreads, strong income support related to bond market investment, and cost pressure drop, etc., broken down:

1) Net interest income: The year-on-year growth rate of 24Q1-Q3 was -1.3%, 1.1 pc narrower than the 24H1 decline. The net interest spread for the first three quarters was 1.52%, down only 2 bps from the first half of the year (11 bps year-on-year decrease). The year-on-year decline in interest spreads is expected to be mainly due to a drop in high-cost deposit pressure and a gradual reduction in deposit listing interest rates.

2) Non-interest income: 24Q1-Q3's year-on-year growth rate was 77.9%, with net revenue from handling fees and commissions accounting for a lower share of total non-interest income (24Q1-Q3 3.5%). The high increase was mainly due to other non-interest income (24Q1-Q3 73.5% year-on-year growth rate), of which 24Q1-Q3 investment income+fair value change profit and loss totaled 0.86 billion yuan, an increase of 82.3% year over year.

2. Asset quality: provision for quarterly improvement

1) As of the end of 24Q3, the company's defect rate and concern rate were 0.97% and 1.56%, respectively, the same as at the end of 24Q2. Meanwhile, the loan ratio and provision coverage rate at the end of 24Q3 were 3.21% and 329.96% respectively. Compared with the end of 24Q2, the provision coverage rate increased by 6 bps and 6.2 pc respectively. The provision coverage rate increased quarterly within 24 years, and the cumulative increase of 24Q1-Q3 reached 25.8 pc.

2) Credit impairment losses for 24Q1-Q3 were calculated at 1.09 billion yuan, an increase of 0.35 billion yuan over the previous year. The credit cost was 1.25%, down 0.2 pc from 24H1.

3. Assets and liabilities: retail credit investment is picking up

1) Assets: As of the end of 24Q3, the company's total assets and total loans grew by 9.88% and 9.85% year-on-year respectively, down 0.9 pc and up 1 pc from the 24Q2 growth rate respectively. Looking at a single quarter, 24Q3 loans had a net increase of 3.3 billion yuan, an increase of 1.3 billion yuan over the previous year. Among them, there was a net increase of 2.2 billion yuan and 1.3 billion yuan for public and retail loans respectively. Retail loan investment improved markedly from month to month, while note pressure dropped by 0.15 billion yuan.

2) Liabilities: As of the end of 24Q3, the company's total liabilities and total deposits grew by 9.8% and 8.1%, respectively. The growth rates of 24Q2 decreased by 1 pc and 3.5 pc, respectively. Looking at a single quarter, the net decrease in 24Q3 deposits was 4.8 billion yuan, mainly due to a net decrease of 5.2 billion yuan in public debt deposits and an increase of 0.3 billion yuan in official deposits. It is expected that deposits will be reduced in stages mainly due to the drop in pressure on high-cost deposits.

Investment advice: Ruifeng Bank's performance growth rate for the first three quarters remained at the leading level in the industry. Looking at the whole year, the bank's interest rate spread decline is expected to narrow year on year, asset quality is expected to remain stable, performance is expected to continue to outperform peers, and maintain a “buy” rating.

Risk warning: macroeconomic downturn; consumption recovery falls short of expectations; asset quality deteriorates further.