The performance is in line with our expectations
Guiyang Bank released the results of 3Q20, the profit before 3Q20 provision was 2.755 billion yuan, down 14.1% from the same period last year, and the net profit was 1.435 billion yuan, down 13.2% from the same period last year.
Trend of development
Credit delivery slowed down. Total assets, loans and deposits at the end of 3Q20 increased by 4.3%, 8.8% and 3.0% year-on-year, and quarter-on-quarter growth of 0.8%, 0.8% and 2.3% compared with the same period last year. 3Q20 loan growth slowed compared with 11.2% of 2Q20 (of which personal loans increased 4.3%) Deposits increased by 2.3% month-on-month, mainly from individual time deposits and public demand deposits (individual current, individual, public and public demand deposits increased by-0.2%, 3.0%, 5.4%,-0.9%, respectively).
The improvement in spreads from the previous month led to a 5.3 per cent year-on-year increase in 3Q20's net interest income. The average daily net interest margin of 3Q20 is 2.52%, and the month-on-month increase in 10bp is mainly due to the downward cost of debt.
Continue to pay attention to the evolution of asset quality indicators. The final non-performing rate of 3Q20 decreased by 1bp to 1.58 per cent from the previous month, while the proportion of focused loans rose to 3.02 per cent from the previous month. The provision of 3Q20 provisions fell by 2 per cent from a year earlier, and the provision coverage increased by 14.47ppts to 300.1 per cent from the previous month.
Private placement is under way. In January 2020, the company announced the pre-plan for a non-public offering of A shares; in July, it issued a second revision, in which the number of shares issued did not exceed 500 million shares, and the amount of funds raised did not exceed 4.5 billion yuan, which was used to replenish the core first-tier capital; and feedback was submitted in October, which is currently subject to approval by the CSRC.
Profit forecast and valuation
We raised net profits in 2020 and 2021 by 3.6% and 9.4% to 5.857 billion yuan and 6.36 billion yuan.
The company is currently trading on 0.6x/0.6x 2020e/2020e Pamp B, and we maintain our target price of 9.24 yuan, corresponding to the upside of 0.76x/0.67x 2020e/2021e Pamp B and 21.1%.
Maintain a neutral rating.
Risk.
The macroeconomic recovery was not as good as expected.