Recently, CCB disclosed its report for the third quarter of 2024. The year-on-year growth rates of 24Q1-3 revenue, PPOP, and return to mother profit were -3.3%, -4.2%, and 0.13%, respectively. The growth rates were +0.27, -0.12, and +1.93 percentage points from 24H1, respectively. Revenue and profit growth rates were stable, and the annualized weighted average ROE was 11.03%. Driven by cumulative performance, scale growth, other non-interest, and provision accruals are the main positive contributions, with interest spreads and cost-to-revenue ratios forming negative contributions.

Core views:

Highlights: (1) The growth rate of non-interest income is rising, and the growth rate of net interest income is stable. The 3Q24 net interest income and non-interest income growth rates were -5.9% and 6.8% respectively, with changes of -0.7 and +4.7pct respectively from the first half of the year. Split the 3Q24 profit growth structure: scale is the main contributor. Judging from marginal changes, the boosting factors mainly include the acceleration of non-interest income growth and the increase in the positive contribution of provisions and income tax; the drag factors include increasing pressure on narrowing interest spreads and rising operating expenses.

(2) The expansion of tables was accelerated, and credit growth in key public sectors was maintained at a high rate. As of the end of September '24, the year-on-year growth rates of CCB assets and loans were 8.1% and 8.9%, respectively. The growth rates changed by +2.8 and -1.2pct respectively from the end of June.

Table expansion is speeding up, and credit investment is relatively good.

(3) Interest spreads are still in a downward channel, but the decline is slowing down. CCB's annualized net interest spread for the first three quarters was 1.52%, down 2BP from 1H24, continuing the downward trend, but the decline narrowed. The decline in interest spreads is mainly due to downward pressure on asset-side earnings. We estimate that 3Q24 yield on interest-bearing assets was 3.27%, down 4BP from 1H24; interest-paying debt cost ratio was 1.87%, down 1BP from 1H24.

Concern: (1) Pressure to “disengage” deposits is still ongoing. As of the end of September '24, the year-on-year growth rates of CCB's interest-bearing liabilities and deposits were 9.5% and 2.5% respectively, up +4.4 and -1.5pct from the end of June, respectively. Deposit growth is still under pressure. Time deposits accounted for 57%, up 0.6 pct from mid-year, and the trend of regularization continues.

Investment advice: As a high-quality state-owned bank, CCB has played a benchmark role in the industry in terms of profitability, integrated management, and transformation and development. Based on the long-term, CCB is based on its “three major strategies” of housing leasing, inclusive finance, and fintech, and continues to expand outreach, actively deepening key areas of the national economy and people's livelihood such as rural revitalization, green development, health care, consumer finance, and technology finance. The transformation results are worth paying attention to. We maintain a “Highly Recommended” rating.

Risk warning: Financial concessions, falling interest spreads; steady growth policies fall short of expectations, and economic recovery falls short of expectations.