2020&1Q21 's performance is in line with our expectations.
Guiyang Bank announced 2020&1Q21 results, 2020 full-year operating income, return net profit increased 9.6 per cent, 2.4 per cent TAC 1Q21 operating income fell 14.7 per cent year-on-year, return net profit increased 4.4 per cent year-on-year. The performance is in line with our expectations.
Development trend
1Q21 revenue growth is weak. 1) the expansion of the balance sheet has slowed. At the end of 2020, total assets, loans and deposits increased by 5.4%, 13.1% and 6.9% respectively compared with the same period last year. At the end of 1Q21, the growth rate was 5.9%, 11.7% and 8.7% respectively, slowing down from 11.3%, 20.4% and 8.0% in 2019. 2) the 1Q21 spread decreased by 16bp to 2.23% compared with the same period last year, the rate of return on interest-bearing assets decreased, and the cost ratio of interest-paying liabilities increased. 3) the non-interest income of 1Q21 decreased by 60.9% compared with the same period last year, and the performance of net fee income and investment income was weak.
In 2020, banks stepped up the disposal of non-performing write-offs, and the non-performing rate decreased, while the proportion of concerned loans rebounded in 1Q21. In 2020, banks wrote off 8.9 billion yuan of non-performing loans, six times that of 2019, and the year-end non-performing rate decreased from the high point at the end of 1Q20 to 1.53%. The ratio of 1Q21 further decreased by 1bp to 1.52%, while the proportion of 1Q21 focused loans increased by 43bp to 2.84%, and the provision coverage ratio decreased by 3.5ppt to 273.8%.
We continue to pay attention to the clearing of bank asset quality risk.
Credit costs peaked and fell, with overdue loans accounting for 2.63 percentage points lower than the mid-2020 pressure. By the end of 2020, overdue loans accounted for 3.39%, with a year-on-year drop of 2.63 ppt, and non-performing / overdue and non-performing / overdue loans for more than 90 days were 45% / 163% respectively, an increase in 12bp/68bp compared with the same period last year. Credit costs have decreased for four consecutive quarters since the peak in the first quarter. The credit costs of the company's 4Q20 and 1Q21 recorded 2.07%, 1.46%, 2.44% for the whole year 2020. We expect that the impairment pressure on the company's assets will be relatively relaxed and the credit cost will remain relatively low in 2021.
Profit forecast and valuation
Keep the profit forecast unchanged. The company is currently trading on 0.6 x 2021e Phand B. As there is still some pressure on the company's asset quality, we lower our target price by 5% to 9.19 yuan, leaving our neutral rating unchanged, corresponding to a 19% upside and 0.7 x 2021e Phand B.
Risk
The risk of asset quality is exposed, and the management of liability cost is not as expected.