Core ideas:
The fundamentals have improved at a low level. Guiyang Bank disclosed that revenue, PPOP and return net profit in the first three quarters changed by-6.7%,-10.6% and + 2.0% respectively compared with the same period last year, and 2.8pct, 2.0pct and-1.2pct respectively compared with the first half of the year. In terms of trend, the fundamentals are gradually improving at low levels. Q3's single-quarter performance decreased by 0.4%. Compared with Q2, the structure of performance growth mainly supported by provisions has not changed; marginal core profitability has improved, mainly due to a substantial increase in other non-interest income, and the negative contribution of interest spreads has deepened.
Interest rate spreads fell slightly, and Q3 retail deposits and loans grew better. The company's annualized interest rate spread in the first three quarters of 21 years was 2.23%, falling 0.03pct from the previous quarter to the level of Q1; measuring the upward 0.04pct of the rate of return on assets compared with the previous quarter, the upward margin was less than the debt cost ratio, and the upward rate of 0.06pct was higher than that of the previous quarter. On the asset side, loans at the end of the third quarter increased by 6.8% compared with the beginning of the year, the same as at the end of the second quarter, Q3 personal loans increased, and corporate loans and bill discount pressure fell. Interest-bearing assets increased by 0.7% over the beginning of the year, the same as at the end of the second quarter. Structurally, investment assets increased month-on-month, while interbank assets fell sharply. On the debt side, deposits increased by 0.5% from the beginning of the year, falling from the end of the second quarter (+ 0.7% from the beginning of the year). Although the high level of Q3 personal deposits increased, the scale of corporate loans continued to decline; interest-bearing liabilities decreased by 0.3% compared with the beginning of the year; the proportion of structured bonds issued (excluding NCD) decreased by 0.91pct, while deposits, borrowing from the central bank, and interbank liabilities (including NCD) all increased.
The bad "double decline" and the improvement of the level of capital adequacy. At the end of the third quarter, the amount of non-performing loans decreased by 80 million yuan month-on-month, the non-performing loan ratio was 1.48%, and 0.03pct decreased from the previous quarter. The efforts of bad generation and disposal have been intensified. In the first three quarters, the annualized bad generation rate was 1.66%, an increase of 0.85 pct compared with the previous quarter; the write-off conversion rate was as high as 105.2%, and the 62.4pct was increased by the month-on-month ratio. In terms of forward-looking indicators, focus on the loan rate rising 0.4pct to 3.30%. At the end of the third quarter, the provision coverage rate was 275.7%, and the provision level decreased by 7.0pct on a month-on-month basis. The core tier one capital adequacy ratio, tier one capital adequacy ratio and capital adequacy ratio were 10.6%, 11.8% and 14.0% respectively, increasing 0.25pct, 0.24pct and 0.21pct respectively compared with the previous month.
Profit forecast and investment advice: low valuation, focus on fundamental improvement. It is estimated that the growth rate of the company's net profit is 2.4% and 6.5% respectively, respectively. The current A share price corresponds to the company's 22nd PE of 3.5X/3.3X and PB of 0.49X/0.44X, respectively. Considering that the company's valuation is at a historically low level, we give the company a 21-year PB valuation of 0.6X, corresponding to a fair value of 8.07yuan per share, and maintain a "buy" rating.
Risk hints: (1) more-than-expected decline in economic growth; (2) significant deterioration in asset quality.
