The savings agent rate was adjusted again: based on the average daily deposit balance of agent outlets in 2023, the comprehensive rate was reduced by about 16 BPS, saving 15.06 billion yuan in savings agency fees. After the rate adjustment plan is approved, it will be implemented from July 1, 2024, and the estimated contribution to 2024/2025 net profit will be approximately 7 billion yuan/14 billion yuan.

Deposit advantages help Postbank's business develop rapidly: The savings agency model helps Postbank deposit growth maintain a high level. As of the end of June 2024, Postbank deposits accounted for 96.5% of total liabilities. Personal deposits account for 88.9% of deposits. The high proportion of personal deposits has kept the revenue contribution of personal banking business high. Among them, net interest income between divisions contributed 80.8% of personal banking revenue. Proxy savings accounts promote the continuous growth of the number of individual customers and the scale of personal customer assets (AUM) managed by Postbank. About 69% of active individual customers, 80% of personal deposits, and 78% of individual customer AUM come from agency finance. The Postbank attaches importance to the development of businesses such as agriculture and inclusive finance. By the end of June 2024, agricultural loans reached 2.22 trillion yuan, inclusive small and micro enterprise loans reached 1.59 trillion yuan, and personal microfinance reached 1.54 trillion yuan.

The overall asset quality has remained steady: the Postbank's non-performing loan ratio, attention rate, and overdue rate are all lower than the average of major state-owned banks. The share of mortgaged loans is in a relatively high position. Forward-looking indicators, bad generation rates, are still at a low level in the industry. The provision coverage rate is higher than the average of major state-owned banks, while the loan ratio is lower than the average of major state-owned banks. Short-term retail loan pressure is rising.

Technology investment remains high, empowering business, management and risk control: In 2023, IT investment was 11.278 billion yuan, up 5.88% year-on-year, accounting for 3.29% of revenue. The IT team at the head office grew to 5061, and the entire bank had more than 7,000 people.

Profit forecasting and investment advice: Considering the general development environment of the banking industry, combined with the characteristics of the Postbank itself. We believe that Postbank's deposit cost advantage is still expected to help stabilize performance, while the advantages and continuous layout of inclusive finance will help expand new credit. Asset quality is relatively excellent, and retail loan risks may fluctuate in the short term. Looking ahead, the retail business still has plenty of room to explore, as well as potential savings agency service rate adjustments. Combined with the development strategy of the Postbank and the empowerment of fintech, we believe that the overall operating efficiency of the Postbank may be expected to improve steadily. In the long run, the Postbank's big retail business is digging deeper into the existing huge customer base, and is expected to drive the growth of revenue. We estimate that the company's revenue from 2024 to 2026 grew 0.04%/4.74% and 6.32% year over year, and net profit grew at -2.23%/6.43% and 8.78% year over year. The company's shareholding rating is maintained by comprehensively considering factors such as the company's business development situation and valuation. According to the closing price of 5.24 yuan/share on November 25, the corresponding PB valuation of Postbank 2024-2026 was 0.62 times/0.57 times/0.53 times, respectively.

Risk factors: the company's strategic development fell short of expectations; due to net capital regulatory pressure, the continuation of scale expansion fell short of expectations; the decline in asset-side returns exceeding expectations and debt-side cost control falling short of expectations will affect the extent of changes in net interest spreads; the continuous improvement trend in asset quality falls short of expectations; savings agency rate adjustments, etc.