Introduction to this report:
The performance of Zheshang Bank's 2023 three-quarter report is in line with market expectations. Revenue was relatively steady, and profits remained in double digits.
Considering that asset quality burdens are being cleared at an accelerated pace, the potential elasticity of subsequent profit growth can be anticipated.
Key points of investment:
Investment advice: Considering the phased pressure of interest spreads, adjust Zheshang Bank's 2023-2025 net profit growth forecast to 12.27% (-2.18pc)/14.23% (+0.35pc)/15.05% (new), corresponding to EPS 0.62 (-0.16) /0.64 (-0.25) /0.73 (new) yuan. Maintain the target price of 5.30 yuan, corresponding to 0.82 times PB in 2023, and maintain an increase in holdings rating.
Revenue is relatively stable, and profits have been released in double digits... In Q3, the revenue growth rate for a single quarter was 3.0%, down 3.7pc from month to month. The overall level and marginal changes were relatively stable compared to peers. Among them, the increase in asset growth and other non-interest income continued to grow rapidly under a high base, supporting revenue-side performance. The downside is that the quarterly net interest spread fell 11 bps month-on-month, and the year-on-year decline also increased. The net profit growth rate for the Q3 quarter was 9.8%, down 4.3pc from month to month, but the cumulative net profit growth rate remained at a good level of 10.5%. At the same time, it was also the highest profit growth rate in the Q3 stock market. Considering that asset quality burdens are being cleared at an accelerated pace, the potential elasticity of subsequent profit growth can be anticipated.
The marginal acceleration of table expansion. Q3 The growth rate of total assets increased slightly by 0.8pc to 16.3% month-on-month. Among them, the credit growth rate increased, and the share of loans also increased markedly. It is speculated that mainly after the allotment of shares is implemented, project reserves that have not yet been implemented in the previous period will be invested centrally in Q3, indicating that capital supplements are in place to open up space for asset investment. In addition, Q3's quantitative price compensation also partially hedged the pressure on the revenue side brought by declining interest spreads. It is expected to maintain a relatively rapid expansion rate under the premise that profits are currently being released healthily and the industry leads the industry.
The bad remains stable. The Q3 non-performing rate and provision coverage rate were the same month-on-month, the loan ratio increased slightly by 1 bps from month to month, and the overall asset quality remained stable. At present, the disposal of defects outside of the inventory list is nearing completion, and the disposal of defects in the inventory is being further accelerated. It is expected that the main indicators of asset quality will enter an improvement channel in 2024.
Risk warning: downside risk for the regional economy; competitive pressure increases risk.