Investment points: as the first A-share listed bank in Northwest China, Xi'an Bank is deeply cultivated there. The scale increases steadily, and the net interest margin is better than the overall level of city commercial banks. Increase the share of non-interest income by strengthening integrated operations. The anti-risk ability of the public loan industry distribution is stronger, the credit cost is lower than the overall level of the city commercial bank, and the provision is sufficient. For the first time, the coverage gives a "better than the market" rating.
Deeply ploughing Xi'an, it is the first A-share listed bank in Northwest China. Xi'an Bank was founded in 1997, changed its name to Xi'an Bank in 2010, and was listed on the Shanghai Stock Exchange on March 1, 2019. The actual control of the company is the Xi'an Municipal people's Government, with a total of 27.25% held by those who act in concert with it. Hold the Yangguang Village Bank in Luonan, Shaanxi (51%) and Xi'an Gaoling Sunshine Village Bank (51%), and participate in BYD Auto Finance (20%).
As of June 30, 2020, there are 180 business outlets under the jurisdiction of the Bank of Xi'an, with a total of 145 in Xi'an. Loans in Xi'an account for about 87%. The management team is stable and experienced, and the salary incentive ranks high among listed city firms and western banks.
From 2017 to 2019, the net interest margin of Xi'an Bank is better than the overall level of City Commercial Bank. The annual compound growth rate of total assets has exceeded 10% since 2010. Every 4-5 years, the total assets reach a level of hundreds of billions. The potential economic growth of Shaanxi Province under the 14th five-year Plan has laid a macroeconomic foundation for the scale expansion of Xi'an Bank. The increase in the proportion of loans and personal loans driven by consumer loans helps Xi'an Bank to maintain an advantage in terms of loan yields. At the same time, Xi'an Bank is committed to diversified sources of debt, adhere to deposit-oriented, and have high-quality and diversified customer resources in the region. The net interest margin rose from 1.9% to 2.2% in 2017-2019, exceeding the net interest margin of city commercial banks.
The proportion of non-interest is on the rise, and the operation is integrated. The proportion of non-interest income of Xi'an Bank increased year by year from 2010 to 2015.
There have been iterations since then, reaching 17.89% in 2019. We have seen a steady recovery in consumption after the epidemic, and we believe that the share of non-interest income will rise after falling in the second half of 2020. 2Q20 accounts for 53.08% of non-interest income. The balance of intermediary matchmaking business is growing rapidly. The connotation of investment banking business has been continuously enriched, and the transformation has been accelerated in 2018 to form a package of investment banking financial services, which has steadily increased from 18.83% in 2008 to 24.28% in 2018. At the same time, the credit product system has been continuously improved, and bank card fees have grown by more than 40% from 2016 to 2018.
The cost of credit is lower than the overall level of city commercial banks, and the provision is adequate. Since 2007, Xi'an Bank has continuously optimized the public loan structure, and the anti-risk ability of the loan structure has been improved. The loan proportion of the top ten customers continues to decline, and the risk of concentration decreases. Through strict risk control and active disposal of non-performing assets, the non-performing rate of Xi'an Bank has declined since 2016 and remained stable as a whole. Since 2013, the cost of credit has continued to be lower than the overall level of city commercial banks and listed banks, while the adequacy of provisions has increased significantly. As of the first half of 2020, the provision coverage rate of Xi'an Bank ranks eighth among listed city commercial banks.
Profit forecast. We predict that the EPS from 2020 to 2022 will be 0.62,0.72,0.84 yuan, and the growth rate of net profit will be 3.03%, 16.74% and 15.89%. According to the three-stage DDM model, the reasonable value is 5.88 yuan. According to the comparable valuation method, the 2020E PB of the company is valued as twice as much according to the PB-ROE model (1.11times as much as the comparable company), and the corresponding reasonable value is 5.75yuan. Finally, the reasonable value range is 5.75-5.88 yuan (corresponding to the PE in 2020 is 9.3-9.5 times, the corresponding PE is 8.44 times), and the rating is "better than the big city".
Risk hints: Xi'an 's economic growth is lower than expected; asset quality has deteriorated significantly; and there have been major adverse changes in policy.
