Events:
On August 26, Xiamen Bank released its 2022 semi-annual report, which achieved operating income of 2.855 billion, an increase of 18.2% over the same period last year, and a net profit of 1.232 billion, an increase of 15.1% over the same period last year. The weighted average return on equity (ROAE) was 11.16%, down 0.64pct from the same period last year.
Comments:
Revenue remained high, while provisions dragged down earnings growth. The company's first-half revenue, profit before provision and net profit from home increased by 18.2%, 14.9% and 15.1% respectively compared with the same period last year, with quarter-on-quarter changes of 0,0.7 and-1.4pct respectively, of which net interest income and non-interest income grew by 7.7% and 90.8% respectively, and quarter-on-quarter changes of-2.8% and 18.3pct respectively. Split the profit growth structure year-on-year, asset expansion, non-interest as the main contribution; from the marginal change, the non-interest contribution has increased compared with the previous quarter, the scale expansion contribution has weakened, and the negative drag on provisions has increased significantly. Under the circumstances that Fujian was frequently disturbed by the epidemic in the first half of the year, the company's overall performance remained stable, demonstrating the company's strength as a leading city business bank in Fujian.
The release of credit slowed down under the disturbance of the epidemic. At the end of 22Q2, the total assets of Xiamen Bank increased by 14.4% compared with the same period last year, with a quarter-on-quarter decline of 5.6pct. Among them, 2Q increased assets by 7.9 billion in a single quarter, 12.944 billion less than the same period last year, and the slowdown in statement expansion is a certain drag on net interest income. In terms of credit issuance, 2Q added 3.63 billion new loans, up 7.812 billion from the same period last year, and the year-on-year loan growth rate decreased by 6.3pct to 14.4% compared with the end of 1Q. The survey learned that the epidemic dragged down the pace of credit issuance of the company in the first half of the year, and 1H22 completed about 40-45 per cent of its annual credit release plan, down from about 60 per cent in the same period last year.
From the perspective of 2Q new loan structure, the proportion of public loans (including discount) and retail loans increased by 62.7% and 37.3% respectively, of which the latter improved 15.1pct compared with 1Q, and the company 2Q retail credit increased. From the perspective of loan investment in the first half of the year, 1) the new public loans are mainly invested in wholesale and retail (34.7%), water conservancy, environment and public facilities management (30.2%); 2) among the new retail loans, it is mainly invested in personal operating loans (122.9%) and personal consumption loans (23.7%). Personal housing loans decreased by 1.253 billion compared with the beginning of the year and increased by 3.975 billion compared with the same period last year. The company continued to promote inclusive small and micro financing increment and expansion in the first half of the year, but the growth of personal housing loans was weak, which was a major drag on retail credit growth.
Deposits have increased significantly from the previous month, and the debt structure has improved. At the end of 22Q2, total liabilities and deposits grew by 14.9% and 21.9% respectively over the same period last year, down 6.0 and 4.8pct respectively from the quarter-on-quarter. Of this total, 2Q deposits increased by 27.844 billion, 677 million less than the same period last year, but increased by 28.225 billion in the first half of the year, an increase of 8.53 billion over the same period last year. The slowdown in the growth of company 2Q deposits is mainly due to a relatively high base in the same period last year. In fact, the month-on-month growth rate still recorded a high level of 15%, and the deposit growth in the first half of the year was significantly better than that in the same period last year. At the present stage, the micro main body's willingness to save has increased, or contributed to the growth of general liabilities. From the perspective of debt structure, the proportion of deposits, bonds payable and interbank liabilities is 66.9%, 20.1% and 12.9% respectively, with quarter-on-quarter changes of 7.51%,-1.81% and-5.7pct respectively. The high increase in deposits from the previous month led to the further optimization of the debt structure. Looking at the deposit structure, retail deposits and public deposits grew by 26.2% and 11.5% respectively over the same period last year, of which the growth rate of public deposits was higher than that of total deposits (4.3pct).
Spreads are expected to remain generally stable. The net interest margin of Xiamen Bank in the first half of the year was 1.49%, narrowing 13bp compared with the beginning of the year. Considering that the company's quarterly net interest income increased 3.3% compared with 1Q, which is higher than the quarter-on-quarter growth rate of 2.3% of total assets, the 2Q interest margin is expected to remain generally stable compared with 1Q. From the perspective of assets and liabilities, the rate of return on interest-bearing assets and the cost ratio of interest-paying liabilities are 3.99% and 2.57% respectively, down 16bp and 6bp respectively from the beginning of the year. Under the influence of the continuous reduction of LPR quotation and the increasing contradiction between supply and demand of credit, the repricing of stock loans and the decline of new loan interest rates put some pressure on the rate of return on the company's assets, but the cost of debt is relatively rigid, resulting in a decline in interest spreads than at the beginning of the year. Looking back, we noticed that the quarter-on-quarter growth rate of the company's 2Q deposits (+ 15.1%) far exceeded that of loans (2%). The comparison of deposits and loans decreased by 11.2pct to 87.1% at the end of 1Q, and the matching degree between the sources and use of funds in the deposit and loan sector has improved. As the expansion of corporate balance sheets accelerates in the second half of the year, a sharp improvement in the deposit-to-loan ratio will help ease the upward pressure on debt costs.
The growth of non-interest income slowed. 1H22, the company's non-interest income increased by 90.8% year-on-year to 580 million, the growth rate improved 18.3pct quarter-on-quarter, continuing the strong performance of 1Q. Of this total, net fee and commission income increased by 28.1% to 239 million year-on-year, mainly driven by wealth management business (YoY+113.4%); net other non-interest income increased by 190.7% to 341 million year-on-year, mainly driven by investment income (YoY+136.1%) and foreign exchange net profit and loss (90 million in the first half, compared with a net loss of 60 million in the same period last year).
The asset quality continues to be excellent, and the risk offset ability remains high. At the end of 22Q2, the non-performing loan ratio of Xiamen Bank was the same as that at the end of 1Q and continued to operate at a low level of 0.9%. The non-performing plus concern rate was 1.77%, which increased 5bp on a quarter-on-quarter basis, but was still at a historically low level. The provision coverage ratio decreased by 7.5pct to 364.2% in the quarter-on-quarter, and the loan ratio decreased by 9bp to 3.29% in the quarter-on-quarter. The provision level decreased somewhat but remained high as a whole, and the risk offset ability continued to maintain a leading level among listed city commercial banks (the average level of 22Q1 listed city commercial banks was 314.1%).
Affected by the dividend factor, the capital adequacy ratio at all levels has declined. By the end of 22Q2, the company's core tier one capital adequacy ratio, tier one capital adequacy ratio and total capital adequacy ratio were 9.83%, 11.02% and 14.35% respectively, down 0.36,0.4 and 1.27pct respectively from a quarter earlier. Affected by the dividend factor, the undistributed profit of company 2Q has declined, resulting in a decline in capital adequacy ratios at all levels.
Earnings forecasts, valuations and ratings. Xiamen Bank is one of the most comprehensive urban commercial banks in Fujian Province. The economic development of Hercynian Economic Zone is strong, and the company's operating location advantage is prominent. The credit of Xiamen Bank is mainly invested in public business, and mainly invested in manufacturing, wholesale and retail, while the retail end is inclined to personal operating loans and housing mortgage loans. At the same time, the company's asset quality is excellent, the defect rate continues to operate at a low level of 0.9%, and the high provision coverage rate makes the company have a strong ability to offset risks and greatly expand the profit adjustment space. The disturbance of the epidemic situation in the first half of the year is a drag on loan delivery, but the company also said that it has not adjusted its annual credit release target. As the epidemic situation tends to stabilize, it is expected that the company will speed up its table expansion in the second half of the year to achieve the annual credit growth target, and revenue in the second half of the year has a stable foundation. To maintain the company's EPS forecast of 0.95 yuan / 1.08 yuan / 1.20 yuan from 2022 to 2024, the current stock price corresponds to the PB valuation of 0.67, 0.61 and 0.56 times, respectively, and maintains the "overweight" rating.
Risk hint: macroeconomic downward pressure increased, broad credit is not as strong as expected.