The company's recent situation

Over the past year, SPD Bank has gradually improved its operating efficiency through the implementation of a “digital intelligence” strategy, organizational structure transformation, and corporate cultural collaboration, which has been realized at the performance level. We are optimistic that the company will rely on changes in the three dimensions of technology, manpower, and philosophy to empower performance.

reviews

Deeply involved in the Yangtze River Delta, credit growth momentum is expected to lead the industry. Guided by the goal of “building the flagship of integrated financial services in the Yangtze River Delta”, we believe that the company can more effectively meet the financial service needs of enterprises and individuals in the Yangtze River Delta region, and maintain good momentum in credit growth. We believe that our unique competitiveness is reflected in: 1) headquartered in the Yangtze River Delta with a complete network layout, which is expected to benefit from a more active regional economy; 2) the company has an integrated management office in the Yangtze River Delta to improve operational efficiency; 3) The group has a complete license and can link SPDB International, Shanghai Trust, SPDB Wealth Management, etc. to achieve comprehensive management; 4) It has brand advantages, including mergers and acquisitions, debt issuance business, free trade business, “SPDB safe haven” risk management services, etc.

Focus on the space for improving debt costs in the context of deep customer base management and interest rate cuts on deposits. Considering that the company is gradually strengthening fine debt management and that deposit pricing is expected to decline under “symmetric interest rate cuts,” we are optimistic about the room for improvement in the company's debt costs. The main ways to optimize debt include: 1) relying on the basic market of public services and insight into corporate financial requirements to implement the main transaction account; 2) seizing government debt issuance opportunities and emphasizing the importance of retail wage payment/business linkage; 3) At the level of the assessment mechanism, the assessment favors low-cost liabilities. Business departments need to focus on the accumulation of customer settlement funds and shorten deposit periods.

Risk management capabilities have been consolidated, and poor performance has led to a downturn. Since 2024, SPD Bank has achieved a more comprehensive risk management coverage pattern through organizational structure transformation, and has actively consolidated the three-level risk management roles of head offices, branches, and branches, and implemented a principal responsible person system. In the first half of 2024, the net generation rate of non-performing corporate loans was 1.11%, lower than the stock bank average, while showing a central downward trend in recent years.

Taking into account the company's gradually consolidated risk control capabilities and policy support, we expect the company's credit costs to remain relatively low.

The increase in majority shareholders' holdings shows confidence in future business prospects. SPD Bank announced on December 19 that Shanghai State-owned Assets Management Co., Ltd. plans to increase its common stock holdings by no less than 47 million shares and no more than 94 million shares within 6 months from December 19, 2024. We are optimistic that under the guidance of market value management of listed companies of central state-owned enterprises, SPD Bank is expected to rely on the transformation of its own operating capacity to achieve sustainable growth in performance.

Profit forecasting and valuation

Keep profit forecasts unchanged. Considering the initial results of the company's reforms, we raised the company's target price by 6% to 11.52 yuan. The company is currently trading at 0.5x/0.4x 2024E/2025E P/B, and the target price corresponds to 0.53x/0.50x 2024E/2025E P/B, and 14% room for growth. Maintain an outperforming industry rating.

risks

The macroeconomic recovery fell short of expectations, and the pressure to maintain asset quality burdens exceeded expectations.