Key points of investment

24H1 Ruifeng Bank's revenue exceeded expectations by 14.9% year-on-year, mainly due to continued high growth in other non-interest rates.

Performance Overview

Rui Fung Bank's 24H1 preliminary accounting (same below) revenue increased 14.9% year over year, and the growth rate decreased by 0.4 pc from month to month; net profit to mother increased 15.5% year on year, and growth rate increased 0.8 pc from month on month 24Q1. The defect rate at the end of 24Q2 was flat at 0.97% compared to the end of 24Q1. The provision coverage rate was 324%, up 19pc from the end of 24Q1.

Revenue was better than expected

Rui Fung Bank's 24H1 preliminary accounting (same below) revenue increased 14.9% year on year, the growth rate decreased 0.4 pc from month on month 24 Q1, net profit to mother increased 15.5% year on year, and the growth rate increased 0.8 pc from month on month 24 Q1. The revenue growth rate was better than our previous expectations. It is inferred that it is mainly due to the continuation of other high non-interest growth trends.

Looking ahead to 2024, Rui Fung Bank's revenue growth rate may decline from 24H1, mainly considering the slowdown in other non-interest rate growth rates. In an environment where credit demand is weak, the downward pressure on scale growth and interest spreads is still strong.

The growth rate of scale is slowing

At the end of 24Q2, preliminary accounting assets and loans increased 6.9% and 7.3% year-on-year, and the growth rate decreased by 6.9pc and 5.2pc from the end of 24Q1. The pace of scale expansion has clearly slowed, and it is presumed that it is mainly due to insufficient demand for credit.

Defects remain stable

The initial accounting defect rate was 0.97% at the end of 24Q2, the same as at the end of 24Q1; the preliminary accounting provision coverage rate at the end of 24Q2 was 324%, up 19pc from the end of 24Q1, and risk offsetting capacity continued to increase.

Profit forecasting and valuation

Rui Fung Bank's net profit is expected to increase by 12.24%/11.77%/11.83% year-on-year in 2024-2026, corresponding to BPS 9.34/10.24/11.25 yuan. The target price is 6.26 yuan/share, corresponding to the 2024 PB of 0.67 times. As of the close of July 17, 2024, the current price was 4.74 yuan/share, corresponding to the 2024-2026 PB valuation of 0.51/0.46/0.42 times. The current price space is 32%, maintaining a “buy” rating.

Risk warning: The macroeconomy has stalled, and bad effects have been greatly exposed.