Give full play to the economic advantages of operating regions, and give full play to the economic advantages of operating regions with the steady growth of revenue and net profit. Chongqing has a developed economy, with a GDP of 2.36 trillion yuan in 19 years, an increase of 9.34% over the same period last year, ranking fifth among the major cities in the country and basically the same as Guangzhou. In addition, Chongqing's per capita disposable income and consumer market are growing steadily. The Bank of Chongqing actively grasps the historical opportunities given to Chongqing and its surrounding areas by the national strategy. Relying on its geographical advantages, the Bank of Chongqing will continue to plan around regional industrial development and give full play to its regional economic advantages in the future.
Based on the strategic positioning of "customer expert bank". Since its establishment, based on the strategic orientation of building a "customer expert bank", Chongqing Bank has actively explored the development path of differentiation, and has become a specialized urban commercial bank focusing on the region, distinctive features and outstanding advantages. As of June 30, 2020, the asset scale of Chongqing Bank is in the forefront of the western region of China. At the same time, Chongqing Bank has become the first bank in the western financial institutions to obtain the highest investment grade rating of City Commercial Bank.
Revenue and net profit increased steadily. As of 3Q20, Bank of Chongqing 3Q20 revenue of 9.797 billion yuan, yoy + 13.13%; return to the mother net profit of 3.891 billion yuan, yoy + 4.60%, the growth rate is higher than 1H20 7.74pct.
As of 3Q20, the total assets of Chongqing Bank is 546.914 billion yuan, ranking in the middle and lower reaches of listed city commercial banks; the growth rate of yoy+16.54%, is higher than 1H20, 1.3pct, in the middle reaches of listed city commercial banks.
The net interest margin is better
The net interest margin rebounded steadily. The bank of Chongqing's net interest margin rebounded after 1H18 fell to 1.58%, and 1H20 recovered to 2.24%, higher than other city banks. In terms of breakdown, the lending rate of the Bank of Chongqing was not affected by the downward market interest rate and remained at about 6% in the 18-20 years of downward market interest rate shock. The cost on the debt side continued to rise, and the rate of return on 1H20 deposits reached 3.01%, the highest level among city commercial banks.
Stable asset quality and stable structure
The defective rate has dropped. As of 1H20, the non-performing loan ratio was 1.24%, down 12BP from the 18-year peak.
In the industry, the non-performing loan ratio of Chongqing Bank is at a lower-middle level. The loan ratio of Chongqing Bank's concern category is in the upper reaches of the selected city commercial banks, which has been declining in the past five years, from 4.25% in 15 years to 3.09% of 1H20. The overdue loan ratio fell 1.81 percentage points from 4.56 per cent in 17 years to 2.75 per cent in 19 years and rebounded to 3.02 per cent in 1H20. In addition, the net generation rate of non-performing loans is very low, and the migration rate of concerned loans has always been at a low level in the industry, and has declined rapidly in recent years.
The provision is good. The provision coverage of the Bank of Chongqing at the end of 1919 was 278.58%, which rose to 363.17% and then fell back to 300.99% in 1H20. The loan allocation ratio has continued to increase since 15 years, from 2.37 per cent to 3.72 per cent of 1H20. Chongqing Bank's provision coverage rate and loan ratio have gradually risen from the lower reaches of the industry to the middle level of the industry, and the risk offset ability is strong.
Investment suggestions: determined to be a "customer expert bank", the Bank of Chongqing will give full play to its regional economic advantages and build a "customer expert bank"; the net interest margin will remain stable at a high level; the scale of deposits and loans will grow steadily; the asset-liability structure will be optimized; attention will be paid to the improvement of asset quality and the structure of the bank will be stable. Due to the existence of a certain premium for new shares, we believe that the reasonable valuation range is 0.8 billion 1x PB target valuation, corresponding to 8.66-10.83 yuan per share, it is recommended to pay attention.
Risk tips: deterioration of asset quality; high risk exposure of individual customers; affected by the low valuation of H shares.