Steady business performance and consolidated provision planning
Ruifeng Bank disclosed the first quick interim results report of a listed bank on July 17. The company's 2024H1 revenue and net profit to mother were +14.9% and +15.5%, respectively, compared to 2024q1-0.4pct and +0.8pct.
Earnings from the company's small subsidies and capital increases for agricultural and commercial banks boosted the results of the first half of the year, and the growth rate may slow down throughout the year. The company's offsite business continued to gain strength, and asset quality improved marginally. We forecast an EPS of 0.99/1.14/1.33 yuan for 2024-26, and a BVPS forecast value of 9.28 yuan for 2024, corresponding to 0.51 times PB.
Comparatively, the company's 2024 Wind unanimously predicts an average PB of 0.57 times. We believe that the company's strategic transformation is effective and has broad scope for business development, and should enjoy a certain valuation premium. The 2023 target PB is 0.70 times, and the target price is 6.50 yuan to maintain the purchase rating.
Credit growth is slowing, and deposits are growing steadily
As of the end of June 2024, Rui Fung Bank's total assets, loans, and deposits grew by 10.8%, 8.9%, and 11.5%, respectively. The growth rates were -3.0 pct, -3.7 pct, and -0.6 pct respectively at the end of March. Q2 is the traditional credit season. Rui Fung Bank's loan size was 121.7 billion yuan at the end of June, with a cumulative increase of 8.3 billion yuan in loans in the first half of the year. The plan is to invest about 16 billion yuan for the whole year, which is in line with the company's investment schedule expectations, and is concerned about the recovery in small retail investment demand in the second half of the year.
Bad trends are stable, and risk offsets are consolidated
As of the end of June 2024, Rui Fung Bank's non-performing rate and provision coverage rate were 0.97% and 324%, respectively, the same as at the end of March, and +19pct, respectively. Ruifeng Bank's non-performing ratio remains stable, provision coverage continues to increase, and risk resilience has been further enhanced. Rui Fung Bank's personal loan non-performing rate increased in 2023, mainly due to insufficient demand after industrial upgrading compounded changes in demand after the pandemic, and the non-performing rate in the micro-finance customer base increased. As the economy gradually improves, the company's defect rate is expected to stabilize, moderate and improve, and provision coverage continues to be optimized.
Based on the main business, consolidate the foundation of management
Endogenous growth+exogenous growth are two-wheel drive, and the advantages of the moat continue to deepen. The company will build on the strategic position of supporting agriculture and stick to the position of inclusive finance. Future profit growth points will come from two aspects. In terms of endogenous growth, we will deepen the transformation of big retail and gain strength on the wealth circuit; in terms of external development, we will give full play to the platform advantages of listed banks and expand growth space such as equity participation and comprehensive finance. In terms of foreign equity investment, Ruifeng transferred 2.58% of Cangnan Agricultural Commercial Bank's shares on June 18. Currently, it holds 7.58% of its shares, making it the largest shareholder. After the capital increase, the company's performance was boosted. The company will continue to promote high-quality equity investment plans and continue to monitor the progress of acquisitions.
Risk warning: Economic recovery fell short of expectations, and the deterioration in asset quality exceeded expectations.