Revenue improved in the second quarter and performance maintained low growth
Revenue in the first half of the year fell 14.4% from the same period last year, narrowing the decline by 7.74pct compared with the first quarter; net profit from home increased by 2.72% compared with the same period last year, an increase in 0.54pct compared with the first quarter. The improvement in the company's operating results in the second quarter was mainly due to the change in fair value profit and loss contribution from negative to positive in the second quarter, and the decline in non-interest income narrowed year-on-year.
The optimization of deposit cost plays a supporting role in the net interest margin.
The net interest margin in the first half of the year was 1.81%, a decrease of 10bp compared with the whole of last year. The decline in net interest margin is mainly due to lower returns on interest-bearing assets, including a decline in loan yields in the first half of the year (51bp), retail loans (85bp) and public loans (41bp). In terms of interest-bearing liabilities, the cost ratio of deposit liabilities in the first half of the year decreased by 3bp compared with the whole of last year, with the most obvious improvement in public time deposits, with the cost rate falling by 36bp compared with the whole of last year.
The average balance of loans with relatively high yields in the first half of the year as a percentage of the average balance of interest-bearing assets rose by 4.02pct compared with the whole of last year. Within deposits, the average balance of retail time deposits with higher cost increased 2.93pct compared with that of last year, but the proportion of deposits with lower cost to the average balance of interest-bearing debt cost increased 1.24pct compared with the whole of last year, and the optimization of interest-bearing debt cost was obvious.
The quality of assets is improved month-on-month, and the overall bad identification is still relatively strict.
At the end of the second quarter, the non-performing rate fell 1bp to 1.67% from the previous quarter; the concern rate increased to 1.14% from the previous month, and the pressure on the generation of hidden non-performing loans increased. Overdue loans for more than 90 days accounted for 76.08% of non-performing loans, and overdue loans accounted for 1.53%. The overall identification of non-performing loans was still at a relatively strict level. At the same time, the provision coverage rate has been increased to 218.18% compared with the previous month, and the ability to resist risks has been enhanced.
The credit supply maintains a high growth rate and the capital has sufficient ammunition.
At the end of the second quarter, total assets increased by 7.92% year-on-year, down 3.25% from the first quarter. Among them, loans and advances grew 16.77% year-on-year, down 1.74pct from the first quarter, and remained at a high growth rate. The core tier one capital adequacy ratio fell 13bp to 10.03% month-on-month, still at a high level. The company still has 4.5 billion convertible bonds not converted into shares, static calculation can supplement the core tier one capital adequacy ratio 3.02pct. The capital pressure of the company is less, and the capital restriction of asset expansion is less.
Investment advice: continue to promote in-depth management in the suburbs, maintain the "increase" rating companies always adhere to the market position of "serving agriculture, rural areas and farmers, serving small and medium-sized enterprises, serving urban and rural areas", and cultivate the native land of Nanjing.
Adhere to the small and scattered strategy, agriculture-related and small and micro loans accounted for 53.55%, an increase in 1.17pct compared with the beginning of the year.
In the face of the impact of the decline of the Bank of China's business in recent years, the company has taken the initiative to implement a differentiated business strategy. As the year continues to increase the distribution of inclusive service stations in rural areas, increase the depth of management in rural and suburban areas, and expand the level of service, the company's business performance is expected to usher in continuous improvement. We forecast performance growth of 6.90%, 10.70% and 10.33% in 2021-2023, valuing it at 0.9 times the PB target in 2021, corresponding to the target price of 3.82 yuan, and maintaining the "overweight" rating.
Risk tips: repeated epidemic situation, economic downturn exceeding expectations, policy introduction exceeding expectations, and asset quality fluctuations.