Qilu Bank Co.Ltd(601665) (601665)
High quality local banks with fast scale growth and good profit performance
Qilu Bank Co.Ltd(601665) its predecessor was Jinan City cooperative bank established on the basis of 16 city credit cooperatives and one city Credit Cooperatives Association in Jinan. In 2004, it introduced the shareholder Commonwealth Bank of Australia. At present, it holds 16.09% as the largest shareholder. At the same time, the shareholders are mainly local state-owned assets, the overall shareholding is relatively balanced and the ownership structure is diversified.
The fundamental performance of Qilu Bank Co.Ltd(601665) is stable: 1) horizontal: at the end of the third quarter, the asset scale was 416.6 billion yuan, which is in the tail echelon among the listed urban commercial banks, ranking second among the 14 urban commercial banks in the province, second only to Bank Of Qingdao Co.Ltd(002948) ; In recent years, benefiting from the improvement of bad debt generation and the stabilization of credit cost, the profit scale has exceeded Bank Of Qingdao Co.Ltd(002948) since 2017, ranking first among urban commercial banks in Shandong Province; In 2020, roe included 11.43%, ranking in the midstream of commercial banks in listed cities. 2) Vertical: at present, it is in the stage of steady expansion, successively opening branches in other cities in the province, and the year-on-year growth rate of asset scale significantly exceeds that of urban commercial banks as a whole. On the one hand, the company accelerated the progress of capital replenishment, on the other hand, it focused on promoting retail transformation. In 2013, it established the strategic goal of "large retail transformation". At present, the total amount of personal deposits ranks first among urban commercial banks in the province. At the same time, the revenue structure has been steadily improved, the proportion of non interest income contributed by principal-agent and settlement and clearing Commission has increased, and the rapid growth of agency income has benefited from the development of financial management business.
The rise of the provincial capital is accelerated and the regional economy is developing
Shandong Province is the most economically developed province in northern China, with the third largest GDP in China, and its growth rate has been higher than that of the whole country for a long time. Under the guidance of the strategy of "strengthening the provincial capital", Jinan's GDP will reach trillion in 2020, narrowing the gap with Qingdao. In the future, Jinan, as a comprehensive experimental area for the transformation of old and new kinetic energy in Shandong, will be positioned as a national central city with broad development prospects.
Based on the dividend of regional economic development, Qilu Bank Co.Ltd(601665) put forward the strategy of "deeply ploughing the city, expanding Xinjiang counties, expanding Shandong and connecting the whole country". On the one hand, the pace of external expansion was increased, and the proportion of loans outside Jinan continued to increase. In the middle of this year, it exceeded the scale of local loans in Jinan for the first time. Among them, the proportion of loans in Tianjin and Liaocheng decreased, mainly increasing the proportion of loans in Qingdao and other provinces. On the other hand, the competition among financial institutions in the province is relatively sufficient and large actors, but Qilu Bank Co.Ltd(601665) market share leads urban commercial banks in the province, The deposit balance in 2020 is within the province (excluding Qingdao) ranks No. 6 among commercial banks, lower than the four major banks and postal savings bank, and its loans rank No. 8, both ranking No. 1 among urban commercial banks in the province. In addition, the company pays attention to expanding the county economy, accelerating the establishment of agricultural assistance service points and extending the service radius. At present, the balance of deposits and loans of county sub branches accounts for 22% and 23%, and 16 rural banks under its jurisdiction have changed from loss in the early stage to steady Income generation.
Optimize the asset allocation structure and resolve the bad stock risk
In recent years, the company has continued to optimize its capital structure and clear off its on balance sheet risks. On the one hand, improve the income generating capacity of the asset side by increasing the proportion of asset side loans, personal loans in loans, and non mortgage loans in personal loans. The proportion of asset side loans continued to increase from 40.3% in 2016 to 49.6% in 2021q3, and the proportion of retail loans as a whole increased to nearly 30%, At the same time, the proportion of deposits on the liability side is stable (as high as 74.7% in 2021q3), the net interest margin of the overall contribution remains comparable to that of the middle reaches of the same industry. On the other hand, it continues to reduce the loan investment in high-risk areas, including Tianjin, Liaocheng and other places in the region, as well as the proportion of manufacturing and wholesale and retail loans with high non-performing rate. At present, the non-performing rate is at the head of 14 urban commercial banks in Shandong Province, which is better than the average level of urban commercial banks in China as a whole At the same time, the deviation degree of overdue 90 + / non-performing loans has decreased to only 56.2% in the middle of 2021, and the proportion of overdue loans / non-performing loans is only 69%, ranking first among listed urban commercial banks. Under the condition of extreme prudence, the non-performing generation rate has turned down since 2019, driving the credit cost to drop steadily. The provision coverage and loan allocation ratio in 2021q3 were 249.2% and 3.28% respectively. Although they are still lower than comparable urban commercial banks, they have stabilized and rebounded month on month.
Investment advice
On the whole, the fundamentals of Qilu Bank Co.Ltd(601665) are sound. Benefiting from the dividends of regional economic development, the scale and performance growth are in the upward channel, the asset negative structure is also continuously adjusted and optimized, the historical bad burden continues to be cleared, and it will be light in the future. The capital of the company is relatively abundant after IPO, and the supplement of capital will further improve the ability of asset expansion. At the same time, Qilu Bank Co.Ltd(601665) dividend rate is at the forefront of comparable peers, up to 32.7% in 2020, second only to Bank Of Qingdao Co.Ltd(002948) , which can provide long-term and stable dividend return.
In terms of profit forecast, our main assumptions are as follows: 1) interest margin: there is still downward pressure from the industry trend, but benefiting from the adjustment of asset negative structure, it will rise slightly in the future; 2) Interest bearing asset scale: driven by regional economic development, the annual growth rate of asset scale is about 15%; 3) Credit cost: the stock of non-performing goods continues to be cleared, and the credit cost decreases.
We estimate that the company's operating revenue from 2021 to 2023 will be RMB 8.735/10.51/11.4 billion respectively, with a year-on-year increase of 10.1% / 15.1% / 13.4%; The net profit attributable to the parent company was RMB 2.79/3.204/3.724 billion respectively, with a year-on-year increase of 10.8% / 14.8% / 16.2%; EPS is 0.61/0.7/0.81 yuan respectively; Corresponding to the closing price of 5.57 yuan / share on November 24, 2021, Pb is 1.05/0.97/0.89 times respectively. At present, the static Pb is higher than the average level of listed urban commercial banks. Considering that the company's profit is improving and the asset quality is stable, we give the company a "overweight" rating for the first time.
Risk statement
1) The risk that the regional economic recovery is slow and the growth rate of credit and assets is lower than expected;
2) Structural risk exposure and the risk that the company's credit cost continues to rise significantly;
3) Industry supervision is stricter than expected.
