Recently, Minsheng Bank disclosed its report for the third quarter of 2024. The year-on-year growth rates of 24Q1 to 3 revenue, PPOP, and profit to mother were -4.4%, -6.6%, and -9.2%, respectively. The growth rates changed +1.80, +0.83, and -3.73 percentage points from 1H24, respectively. The revenue decline narrowed, profit growth rate declined, and the annualized weighted average ROE was 6.5%.

Driven by cumulative performance, scale growth is the main positive contribution, with interest spreads, cost-revenue ratios, and provisions forming major negative contributions.

Core views:

(1) The marginal decline in revenue narrowed, and the decline in the growth rate of non-interest income narrowed. In the first three quarters of 2024, Minsheng Bank achieved total revenue of about 101.66 billion yuan, a year-on-year decrease of 4.37% and an increase of 1.8 percentage points over the mid-year growth rate.

Among them, net interest income was 73.743 billion yuan, down 4.49% year on year, up 0.87 percentage points from mid-year growth; non-interest net income was 27.917 billion yuan, down 4.05% year on year, up 4.16 percentage points from mid-year growth.

(2) Interest spreads have stabilized. Minsheng Bank's 3Q24 interest spread was 1.40%, up 2BP from 1H24. Looking ahead, factors such as lower interest rates on stock mortgages and multiple rounds of LPR cuts during the year will still suppress the return on domestic assets, but the decline in debt costs may create some hedging.

(3) Asset quality indicators are stable. As of the end of the third quarter of '24, Minsheng Bank's non-performing loan balance was 65.6 billion yuan, accounting for 1.48%, a slight increase of 1 BP compared to 24H1, and the non-performing rate was relatively stable. The 24Q3 loan ratio and provision coverage rate were 2.16% and 146.3%, respectively, down 0.03 and 3.0 percentage points from month to month, and provision declined slightly.

(4) Marginal increase in the growth rate of assets and deposits and loans. In 24Q3, Minsheng Bank's asset, loan and deposit growth rates were 2.34%, 1.31%, and -0.57%, respectively, up 3.52, 0.57, and 3.21 percentage points from the end of June, and the growth rate of deposits and loans improved marginally.

Investment advice: Minsheng Bank's three-quarter performance growth rate was in line with expectations. Interest spreads stabilized, deposit and loan growth rates increased marginally, and asset quality indicators were low and stable. Given the continued relatively low performance growth rate in '24, we forecast profit growth of -3.9%/0.5% for 24/25. The company's valuation is low, the dividend ratio is high, and the valuation implies some fundamental pressure. In the face of strengthened policies and the restoration of real estate, there are valuation repair options, and 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.