The Postbank's net profit, operating income, and PPOP for the first three quarters were +0.2%, +0.1%, and -1.9%, respectively. The growth rate was +1.7pct, +0.2pct, and +4.2pct in the first half of the year. The company's third-quarter results were basically in line with our expectations. Highlights include strong resilience in interest spreads, narrowing revenue declines, and optimization of operating costs. The company's five major differentiated growth results have been remarkable, maintaining the A/H share increase/purchase rating.

Accelerate asset expansion and optimize debt costs

The growth rates of total assets, loans, and deposits at the end of September were +9.3%, +9.5%, and +11.2%, respectively, compared with +0.8pct, -1.2pct, and -0.5pct at the end of June. Loan growth slowed slightly, adding 120.6 billion in 24Q3, contributing 31%/47%/22% to public/retail/notes respectively. The net interest spread of 24Q1-3 was 1.89%, down 2 bps from 24H1, and only 12 bps during the year. The decline was superior to that of peers. It was mainly due to asset side efforts to differentiate growth poles, maintain pricing resilience through smaller diversification, and strong debt-side cost control. Net interest income from 24Q1-3 was +1.5% YoY, maintaining positive growth compared to H1-0.3pct.

The decline in revenue has narrowed, and operating costs have been optimized

Non-interest revenue in January-September was -6.0% year-on-year, with a growth rate of 24h1+1.6pct. The decline in mid-income narrowed. Intermediate business revenue was -12.7% year-on-year in the first three quarters, and the growth rate was 24H1+4.1pct. The company actively responded to the impact of agency insurance policy adjustments and deepened the “commercial bank+investment bank+investment” joint operation. Other non-interest income in January-September was +0.5% year-on-year, down 1.0pct from H1, with net investment income +4.7% year-on-year. The Q1-3 cost to revenue ratio is estimated to be 60.0%, +0.8 pct year over year, business management expenses +1.5% year over year, and growth rate compared to H1-2.9 pct. The company has implemented an agency rate reform plan, and operating costs are expected to continue to be optimized.

Implicit risk fluctuations to consolidate capital levels

The non-performing loan ratio and provision coverage ratio at the end of September were 0.86% and 302%, respectively, +2bp and -24pct compared to the previous month.

The company's overall poor performance is relatively stable, and there has been an increase in poor business loans for small businesses and individuals. The non-performing personal loan ratio increased by 7 bps compared to H1 to 1.21%. The attention rate increased by 10 bps to 0.91% compared to the end of June, and the annualized bad generation rate increased by 5 bps to 0.79%, and hidden risks fluctuated. The capital adequacy ratio and core Tier 1 capital adequacy ratio at the end of September were 14.23% and 9.42% respectively, compared with +0.08pct and +0.14pct at the end of June.

Give A/H shares a 25-year target PB0.70/0.60 times

We predict that the company's net profit for 24-26 will be 87.8/90.3/95 billion yuan (previous value 88/91.8/98.3 billion yuan), with a year-on-year growth rate of 1.8%/2.9%/5.2%, and a 25-year BVPS of 9.18 yuan. A/H shares correspond to PB0.57/0.45 times, and A/H shares can be compared to the company's 25-year Wind expectations of 0.60/0.47 times. The company's five differentiated growth results are remarkable. Savings agency costs are optimized, and they are entitled to a certain amount The valuation premium gives A/H shares a 25-year target PB0.70/0.60 times, and the target price for A/H shares is 6.43 yuan/5.99 HKD.

Risk warning: Policy progress falls short of expectations; economic recovery falls short of expectations.