Core ideas:
The performance is on the decline, and the mid-closing performance is eye-catching. The company disclosed that its revenue, PPOP and home net profit grew by-2.23% year-on-year in the first three quarters of 2020.
2.53% Universe 10.54%), 1.59% (20H1Unix 19A: 4.79% Universe 16.83%), 1.83% (20H1Universe 1.95% Universe 13.03%), the decline in performance slows down, and the growth rate of return profits becomes positive in a single quarter. From the perspective of cumulative performance in the first three quarters, the scale of interest-bearing assets, other non-interest income and cost-income ratio are the main positive contributions, while the main negative contribution factor is interest spread. From the split of 20Q3's single-quarter results, the negative contribution of the spread expanded, the provision turned to a negative contribution, while the net fee income remained a positive contribution. In the first three quarters, non-interest income and net fee income grew by 26.9% and 22.0% respectively compared with the same period last year, and 20Q3 single-quarter net fee income increased by 344.9% year-on-year, forming a more favorable support for revenue.
We will continue to maintain the advantage of deposit costs and slow the release of downward pressure on interest spreads. The company disclosed that the net interest margin in the first three quarters was 1.96%, which was lower than that of 20H1 by 5bps. We estimate that the rate of return on interest-bearing assets of 20Q3 is 3.69%, which is 7bp lower than that of 20H1. The debt cost ratio of 20Q3 is 1.98%, which is the same as that of 20H1. The spread pressure mainly comes from the asset side, and the proportion of low-yield discount is still high. On the debt side, deposits / corporate deposits in the first three quarters increased by 16.2% and 18.4% compared with the same period last year, up 4.28pct and 6.88pct compared with 20H1, and the proportion of deposits in interest-bearing liabilities rose to 74.0%. The company is rooted in the mainland, and the advantage of debt cost is obvious. looking back, it is expected that with the economic repair, the proportion of general loans will gradually increase, and the pressure of subsequent interest rate spreads is expected to ease.
The bad recognition is accelerated, and the asset quality is relatively stable. The company disclosed that the defect rate of 20Q3 was 1.68%, which was the same as that of 20H1. In terms of forward-looking indicators, both the loan rate and the balance of the concern category fell, and the bad recognition accelerated. The ratio of 20H1 loans overdue for more than 90 days to non-performing loans is 74.4%, and the determination of non-performing loans is strict. We estimate that the net new generation rate of bad 20Q3 is 1.00%, which is 0.12pct higher than 20H1 and 0.48pct lower than that of the same period last year. Generally speaking, the asset quality pressure in the future can be controlled. The company accumulated credit impairment losses of 1.236 billion yuan in the first three quarters, an increase of 2.74% over the same period last year. The provision provision is relatively stable, and the 20Q3 provision coverage rate is 242.09%. On the whole, the company's current asset quality is relatively stable, but we also need to pay attention to the follow-up potential pressure caused by the high loan volume this year.
Investment advice: the performance is in line with expectations, but the mid-income performance is strong, which forms a strong support for the performance. The company is rooted in Nanjing and has obvious geographical advantages and deposit advantages. in recent years, it has actively promoted retail transformation and wealth management, and mid-income has become an engine of performance growth. It is estimated that the company's net profit growth in 2020 / 21 will be 1.71% and 7.72% respectively, and the latest closing price will be 0.39 and 0.42 yuan per share, respectively. The latest closing price corresponds to the PE of 10.01X and 9.29XMagnePB in 2020 / 21, respectively. In the past two years, the PB center of the company's valuation is about 1.1x. We think we can give the company a 20-year PB valuation of 1.1X, estimate a reasonable value of 4.34yuan per share, and maintain the "overweight" rating.
Risk hints: (1) more-than-expected decline in economic growth; (2) significant deterioration in asset quality.