The spread is downward and the quality of assets is stable.
The company released its annual report 2020 and quarterly report 2021 on April 29. The net profit, revenue and PPOP of 1Q21 were + 4.4%,-14.7% and-18.8%, respectively, compared with + 2.3pct,-24.3pct and-32.3% in 2020. Revenue growth is mainly dragged down by medium-and low-speed growth in scale, downward interest spreads and investment business, lower credit costs drive profit release, and asset quality remains stable. We predict that the EPS for 2021-23 will be 1.72, 1.93, 2.16 yuan, and the target price will be 9.59 yuan, maintaining the "overweight" rating.
Deposit expansion accelerates, but the current rate decreases, and interest spreads fall.
At the end of March, total assets, loans and deposits were + 5.9%, + 12.3% and + 8.7%, respectively, compared with + 0.5pct,-0.7pct and + 1.8 PCT at the end of 20 years. Q1 new loans are all contributed by loans to the public. Deposit expansion accelerated, of which public deposits increased slightly by 2.6 per cent year-on-year and-4.7 per cent compared with the same period last year, and companies turned to expand retail deposits (+ 21.1 per cent year-on-year), but time deposits accounted for 79 per cent of new retail deposits in Q1, resulting in a deposit demand rate of 40.1 per cent at the end of March compared with the end of 2020-3.1pct, dragging down deposit costs. The 1Q21 net interest margin is 2.23%, which is 29bp lower than that in 2020. We speculate that both the asset-end return and the liability-side cost ratio are a drag on it. 1Q annualized ROE year-on-year-1.04pct to 16.24%.
The quality of assets is stable and the cost of credit is reduced.
At the end of March, the defect rate and provision coverage rate were 1.52% and 274% respectively, which were higher than those of-1bp and-3pct at the end of 20 years. The concern rate was 2.84% higher than that of + 43bp at the end of 20 years. The intensity of bad disposal is lighter than that of 4Q20, and the decline in the defect rate is mainly due to the slowing down of bad new generation, and the annualized bad generation rate of 1Q21 is lower than the high point of 4Q20 by 1.78pct to 1.42%. The annualized credit cost of 1Q21 is 1.46% lower than that of 4Q20.
Non-interest income is under pressure and capital adequacy ratio is increased.
From January to March, the intermediate business income was-9.1% compared with the same period last year, which was higher than the growth rate of-27.2pct in 2020, and the median income / revenue was 6.8%.
The better mid-income growth in 2020 was mainly driven by agency, financial management and investment banking business, with the balance of non-capital preservation at the end of 20 years higher than that at the end of June by + 9.9% to 87.9 billion yuan. Other non-interest income from January to March was-81.3% compared with the same period last year, mainly due to the weaker performance of the bond market compared with the same period in 2020. At the end of March, the capital adequacy ratio and core tier one capital adequacy ratio were 13.04% and 9.53% respectively, compared with + 0.16pct and + 0.23pct at the end of 2020.
The target price is 9.59 yuan, maintaining the "overweight" rating.
In view of the fact that the company's revenue growth is dragged down by the growth rate of scale, interest spreads and investment income, we forecast that the EPS in 2021-2023 will be 1.72pm 1.93max 2.16RMB (the previous 2.12pm 2.42max-RMB). The predicted value of BVPS in 21 years is 11.84 yuan, corresponding to 0.70 times of PB. Compared with the 21-year Wind consensus forecast of listed banks, the PB is 1.06 times. We believe that the company has more room for growth in the province, but the potential risks still need to be gradually cleared. We maintain the target PB of 0.81 times in 2021, corresponding to the target price of 9.59 yuan, and maintain the "overweight" rating.
Risk hint: the duration of the economic downturn is longer than expected, and the deterioration of asset quality is higher than expected.