浦发银行(600000):息差边际企稳 资产质量夯实

SPD Bank (600000): Interest spreads are marginal stabilization, asset quality consolidation

民生證券 ·  08/30/2022  · Researches

Incident: On August 26, SPD Bank released the 22H1 report, with revenue of 98.64 billion yuan, YoY +1.3%; the net profit of the mother was 30.17 billion yuan, YoY +1.1%; the non-performing rate was 1.56%, and the provision coverage rate was 156%.

Revenue and profit increased slightly. The 22H1 company's revenue growth rate was +0.3% month-on-month compared to Q1. Scale expansion and stable net interest spreads were the main drivers; the year-on-year growth rate of net profit was -2.6pct month-on-month, which may be due to increased provision planning. Looking at revenue disaggregation, net interest income increased 1.5% year-on-year, affected by weak credit demand in Q2, -1 pct month-on-month; middle income increased slightly by 0.1% yoy and -2.4pct month-on-month. Among them, bank card business increased 12.2% year on year. Affected by capital market fluctuations, revenue from custodian, agency and other businesses all experienced negative growth; other non-interest income benefited from increased investment income and exchange profit and loss, with a year-on-year growth rate of +8.8pct.

The scale expanded steadily, and interest spreads stabilized marginally. The 22H1 net interest spread was 1.84%, a slight increase of 1BP from 2021, and the net interest spread stabilized marginally. On the asset side, the growth rate of 22H1 loans has slowed. Among them, loans to the public sector continued to expand and strengthen. Loans increased by 132.1 billion yuan in the first half of the year, which has already exceeded the total growth in 2021, supporting the steady expansion of interest-bearing assets. The average loan balance compared to interest-bearing assets continues to rise, but due to loan repricing, the return on interest-bearing assets is still -4 BP month-on-month. On the debt side, the decline in the share of 22H1 current accounts led to a deposit interest rate of +5BP month-on-month, but benefitted from the pressure drop in interbank debt costs (-23BP month-on-month) and continuous optimization of the debt structure. The cost ratio of interest-bearing debt was -5BP compared to 2021, which took care of net interest spreads.

Build three “light, green, and panoramic” banks. A light bank, SPDB Wealth Management opened in 2022, and the “Big Wealth Integration” was further improved. The 22H1 non-capital protected financial management scale became positive in half a year, which is expected to become a new profit point. Green Bank strengthens and enhances the “Pudong Green Innovation” brand. The 22H1 company's green credit increased 22% from the beginning of the year, ranking second among stock banks. Panorama Bank, technology empowers user development, and has built digital platforms such as mobile banking, Pu Hui to Home, and Pu Hui Cloud Warehouse to continuously improve customer acquisition and retention capabilities. 22H1 retail mobile banking MAU increased 27% from the beginning of the year.

The quality of assets has been steadily consolidated by “controlling the new and reducing the old”. The 22H1 non-performing rate was -2BP month-on-month compared to Q1. The non-performing balance and non-performing rate achieved a “double decline” for ten consecutive quarters. The Q2 company increased its provision planning efforts. The provision coverage rate was +9.6pct month-on-month, and the loan ratio was +16BP month-on-month. Obsolescence has been reduced. Since 2016, the company has maintained a write-off and disposal effort of more than 60 billion yuan, and inventory baggage has been cleared at an accelerated pace. According to the new control, the 22H1 non-performing ratio was -26BP at the end of 2021, mainly due to poor effective pressure drop in the manufacturing industry. The non-performing retail rate was affected by the epidemic +14BP month-on-month, mainly dragged down by mortgages (+12BP) and operating loans (+30BP).

Investment advice: marginal stabilization of interest spreads and consolidation of asset quality

The company continued to build a location advantage in the Yangtze River Delta, expanded steadily in scale, and continued to optimize its balance and liability structure; 22H1 withstood the impact of the epidemic and achieved a double increase in operating performance. Risks are being “controlled by the new and the old”, and efforts to dispose of bad defects have continued to increase, and the bad balance and non-performing rate have achieved a “double decline” for ten consecutive quarters. EPS for 22-24 is expected to be 1.87 yuan, 1.94 yuan, and 2.04 yuan respectively. The closing price on August 30, 2022 corresponds to 0.4 times PB of 22 years. It was covered for the first time and gave a “recommended” rating.

Risk warning: Decline in macroeconomic growth; frequent risk of the epidemic; deterioration in asset quality.

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