The Zhangjiagang trip concentrated on the fertile economic ground of the Jiangsu region. The customer resources, business characteristics and operating advantages in the private+small and micro sectors accumulated over the years continued to consolidate the moat advantages for the company's differentiation and sustainable development. Maintain the company's “increase holdings” rating.
Matters: On the evening of March 27, the Bank of Zhangjiagang released its 2022 annual report. The annual operating income and net profit returned to the mother were +4.6% and +29.0%, respectively; the non-performing loan ratio for the fourth quarter fell 0.01pct to 0.89% month-on-month.
Fluctuations in non-interest projects in the fourth quarter slightly disrupted the annual revenue growth rate. The company's annual net profit attributable to the mother was +29.0% year on year (+30.1% in the first three quarters). Looking at the breakdown: 1) the revenue side fluctuated on the single quarter, the year-on-year operating income was +4.6% (the first three quarters +7.0%), and profit and loss fluctuations from mid-quarter income and fair value changes all expanded; 2) The expenditure side was generally stable. The company's annual cost to revenue ratio was 32.61% (31.11% in the same period last year). Cost control was generally stable; in terms of provision, the company's annual asset impairment loss was -18.4% year on year (same period in the first three quarters, -6.2%) The supporting effect of provisions for the fourth quarter on profits Further strengthening. Thanks to the rapid increase in profits, the company's annual ROE increased by 1.13 pcts to 12.21% over the previous year.
Interest spreads continued to stabilize, prompting a recovery in the growth rate of net interest income. The company's annual net interest income was +6.1% year on year (+5.7% in the first three quarters). Looking at volume and price factors split: 1) Scale expansion was steady, with total assets increasing by +1.5% month-on-month in the fourth quarter (+2.0% in the same period last year). While the company increased credit investment during the quarter, it moderately reduced bond investment in various categories; 2) The margin of interest spreads announced by the company for the full year and the first three quarters averaged 2.25%, reflecting a steady trend in the company's interest spreads for the year and the first three quarters, reflecting a steady trend in the company's quarterly interest spreads, especially during the quarter. The decline in year-on-year growth reflects the effectiveness of debt cost management.
Interest rate fluctuations in the bond market caused the company's non-interest rate fluctuations to increase in the fourth quarter. The company's annual non-interest income was -6.5% year-on-year (-2.2% compared to the first three quarters), of which: 1) Net revenue from fees and commissions was -62.4% year-on-year (+53.9% compared to the first three quarters). The judgment was mainly in the context of fluctuations in net financial value in the fourth quarter, weak agency financial management business dragged down agency revenue performance (-32.3% for the whole year); 2) Other non-interest income for the whole year was +7.9% year-on-year (+11.7% in the first three quarters). Interest rate acceptance and redemption in the fourth quarter of the bond market had a great impact. The profit was nearly 30 million less than the previous year.
Asset quality continues to be optimized, and provision levels remain stable. The company's year-end non-performing loan ratio was 0.89% (down 0.06pct/0.01pct from the beginning of the year and the previous quarter, respectively). Looking at broad asset quality, the company's year-end attention rate and overdue rate were 1.50%/1.22% respectively, maintaining a level of preference comparable to that of peers. In terms of provisions, the company's full-year asset impairment loss was -18.4% year on year (-6.2% compared to the previous three quarters), and the supporting effect of the fourth quarter provision on profits was further strengthened; the year-end corporate provision coverage rate was 521.1% (down 19.9 pcts from quarter to quarter), and it is expected that the company will increase write-off efforts in the fourth quarter as the main reason.
Risk factors: Macroeconomic growth has declined more than expected, leading to a sharp deterioration in asset quality.
Investment suggestions: The Zhangjiagang Bank concentrates on the economic fertile ground of the Jiangsu region, and has accumulated customer resources, business characteristics and operating advantages in the private+small and micro fields over the years, continuously consolidating the moat advantage for the company's differentiation and sustainable development... Considering the increased profit support for the company's profit for 202Q4, the company's 2023 EPS forecast was slightly adjusted to 0.89 yuan (the original forecast was 0.87 yuan), and the new company's 2024/25 EPS forecast for 2024/25 is 1.05 yuan/1.21 yuan. The current company's stock price corresponds to 0.64x PB in 2023. Combining the three-stage dividend discount model (DDM) and comparable company valuations, the company's A-shares were given a target valuation of 0.82 x PB (2023), corresponding to a target price of 5.80 yuan. Maintain the company's “increase holdings” rating.