（2）资产质量指标稳定。公司24H1 末不良率1.24%，环比24Q1 持平；24H1 拨备覆盖率201.7%，环比24Q1 上升1.8pct。24H1 逾期率1.21%，较23 年末上升15BP，指标有所波动，但公司逾期贷款/不良贷款97.6%，依旧低于100%，不良认定标准依旧严格。Core views:
The Bank of China released its 2024 semi-annual report: 24H1 revenue, PPOP, and net profit to mother increased by -0.7%, -2.7%, and -1.2% year-on-year respectively, with growth rates of +2.3 pct, +2.3 pct, and +1.7 pct, respectively, compared with 24Q1. The year-on-year growth rate of performance rebounded, better than market expectations. Judging from cumulative performance drivers, scale growth and effective tax rates are the main positive contributions. The narrowing of net interest spreads, the cost-revenue ratio, and provision estimates have caused a certain drag.
(1) Interest spreads stabilized month-on-month. 24H1's net interest spread was 1.44%, flat from 24Q1, and stable from month to month. Stabilizing interest spreads will help ease the downward pressure on net interest income. Bank interest spreads were high and low last year. If the steady trend continues, the annual net interest income growth rate is expected to correct, making a positive contribution to revenue growth.
(2) Asset quality indicators are stable. The company's 24H1 final defect rate was 1.24%, the same as 24Q1; 24H1 provision coverage rate was 201.7%, up 1.8 pct from 24Q1. The 24H1 overdue rate was 1.21%, up 15BP from the end of 23. The indicators fluctuated, but the company's overdue loans/non-performing loans were 97.6%, still below 100%, and the criteria for determining bad were still strict.
(3) The growth rate of risk-weighted assets declined, improving dividend sustainability. The company's scale expansion has moderately slowed. At the same time, benefiting from the new capital regulations, the company's risk-weighted asset growth rate declined markedly. At the end of 24H1, the company's risk-weighted asset growth rate was 2.1%, significantly lower than the growth rate of the company's interest-bearing assets, and also lower than the growth rate of the company's endogenous capital (ROE* (1-dividend rate), about 6.3%), improving the sustainability of the company's medium- to long-term dividend rate.
(4) After stock price adjustments, the allocation value is more significant. The stock prices of the four major banks have been adjusted today, but the overall allocation value of the major banks remains the same. Taking China as an example, the current dividend rate for A-shares is 4.8%. Under the 30% dividend rate, endogenous capital retention is about 6%. With the current valuation unchanged, the annualized return of investment companies is about 11%. In the current environment of low interest rates and scarce assets, the allocation value is still the same.
Profit forecast and investment advice: We expect the company's 24/25 net profit growth rate to be 1.03%/3.75%, EPS 0.75/0.78 yuan/share, respectively. The current stock price corresponds to 24/25 PE 6.54X/6.29X, respectively, and the corresponding 24/25 PB is 0.60X/0.56X, respectively. Refer to the industry valuation, and give a 24-year PB valuation of 0.7X, with a corresponding reasonable value of 5.71 yuan per share.
According to the current AH premium ratio, H shares have a reasonable value of HK$4.12 per share, all maintaining a “buy” rating.
Risk warning: (1) economic growth has declined beyond expectations; (2) rising deposit costs have exceeded expectations; (3) international economic and financial risks have exceeded expectations; (4) policy regulation has exceeded expectations.
