The growth rate of revenue has increased significantly, and the middle income has shown a relatively rapid growth.

Revenue in the first half of the year rose 9.10% from the same period last year, an increase of 15.18 pct over the first quarter, and net profit increased by 12.14% compared with the same period last year, an increase of 5.18pct compared with the first quarter. The accelerated release of the company's performance is mainly due to the reduction of the drag on investment gains and losses and fair value change gains and losses. secondly, the net interest margin and costs also have a certain positive contribution. The main negative effects come from the increased provision, the slowdown in scale growth and the positive year-on-year growth rate of income tax. The company increased the development of agency, settlement, financial management and other agency business, and the net income of fees and commissions in the first half of the year increased by 77.69% compared with the same period last year.

The net interest margin widened compared with the first quarter, and the proportion of real estate loans decreased.

The net interest margin in the first half of this year was 2.24%, up 4bp from the first quarter. According to our estimates, this is mainly due to the fact that the increase in the rate of return on interest-bearing assets is greater than that in the cost rate of interest-bearing liabilities.

The structure of the company's assets and liabilities tilted towards retail business in the first half of the year. At the end of the second quarter, the ratio of personal loans to total loans and the ratio of personal deposits to total deposits increased by 76bp and 1.83pct respectively compared with the end of last year. In the direction of personal loans, the company has increased the intensity of personal housing loans and reduced the scale of consumer loans.

In the investment of public loans, the company increased the relatively high-yielding wholesale and retail loans, while reduced the scale of real estate loans. At the end of the second quarter, the ratio of loans to total loans in the two industries increased by 1.50pct and decreased by 1.83pct compared with the end of last year, respectively.

The defective rate and concern rate have both dropped, and the provision coverage rate has increased.

At the end of the second quarter, the balance of non-performing loans fell by 0.84% from the previous quarter, and the non-performing rate dropped by 3bp to 1.59%. The concern rate dropped to 3.65% from the previous month, and the pressure on the generation of hidden non-performing loans was reduced. At the end of the second quarter, the provision coverage increased by 18.84pct to 271.54% from the previous quarter, and the ability to resist risks was enhanced.

The growth rate of scale has slowed down, and capital is a little tight.

At the end of the second quarter, total assets increased by 14.59% compared with the same period last year, down from the first quarter by 6.27pct. Among them, the year-on-year growth rate of total loans fell 3.85pct to 15.91% compared with the first quarter, which is still higher than the growth level of total assets. At the end of the second quarter, the core tier one capital adequacy ratio fell 35bp to 9.10% from the previous quarter, which is at a lower level of listed agricultural and commercial banks. As the company still has about 5 billion yuan of convertible bonds that have not been converted into shares, there is still room for capital replenishment in the future.

Investment advice: promote prudent, steady and high-quality development, maintain "increase" rating companies strive to consolidate the foundation of development, improve the quality of development, asset quality is stable and improve, and revenue growth has increased significantly. In the future, the company will closely follow the strategic guidance of "targeting first-class listed banks, deepening digital transformation, and improving fine management". In order to achieve high-quality development, we will make efforts to expand the stock and new customers, optimize the growth rate of business structure and profit scale, promote the integration of scene channels, and improve quality and efficiency. We forecast a growth rate of 12.13%, 13.38%, 14.96% for 2021-2023, and give it a valuation of 0.92 times the target PB in 2021, corresponding to the target price of 4.78 yuan per share, and maintain the "overweight" rating.

Risk tips: repeated epidemic situation, economic downturn exceeding expectations, policy introduction exceeding expectations, and asset quality fluctuations.