Bank Of Ningbo Co.Ltd(002142) (002142)
The company plans to acquire 70% equity of Huarong Xiaojin with RMB 1.091 billion
On December 27, the company announced that the board of directors approved the proposed transfer of 70% equity of Huarong Consumer Finance Co., Ltd. with RMB 1.091 billion. On the same day, China Huarong (2799. HK) also announced that the company signed the non listed state-owned property rights trading contract for financial enterprises with Bank Of Ningbo Co.Ltd(002142) on December 27. The appraisal price of the equity transfer was RMB 727 million, and the transfer price finally confirmed through online bidding by Beijin exchange was RMB 1.091 billion, 50% higher than the appraisal price.
Realize the dream of eliminating gold for many years, and the wealth management business is even stronger
As early as June 19, 2018, the company announced that with Fubang furniture Ningbo City Plaza company (hereinafter referred to as Plaza company) jointly signed the investment agreement to establish YONGYING consumer finance company, of which Bank Of Ningbo Co.Ltd(002142) invested 300 million yuan, accounting for 60%. However, the subsequent information disclosed by Ningbo Fuda Company Limited(600724) (the parent company of Plaza company) showed that the equity participation intention of Plaza company was not approved by the CBRC (according to Ningbo Fuda Company Limited(600724) ) 2019 annual report), no longer invest in the consumer finance company. Since then, the progress on the establishment of YONGYING consumer fund has not been updated. On June 11 this year, the board of directors of the company deliberated and approved the proposal on foreign equity investment, with an investment amount of no more than 5 billion yuan and a shareholding ratio of no less than 51%. The investment objects are non bank financial institutions including trust companies and consumer finance companies. The transfer of Huarong Xiaojin’s equity is a fulfillment of the dream of establishing Xiaojin company since 2018.
The establishment of consumer companies is an important part of building wealth management business advantages. In recent years, the company has insisted on focusing on the expansion of large retail business and light capital business, and the business scale and profit contribution have been continuously improved. The proportion of the company’s non interest income in revenue has increased significantly in recent five years, from 26% in 2016 to 37% in the first three quarters of this year. According to the data, Huarong Xiaojin has five marketing centers in Beijing, Shanghai, Shenzhen, Hefei and Changsha. In 2020, it turned losses into profits and realized a net profit of 06.4 million yuan that year. By the end of the first half of this year, the net assets of Huarong Xiaojin had reached 795 million yuan, which is equivalent to the acquisition of 196xpb. The acquisition of the consumer loan license can open the regional restrictions on the consumer loan exhibition industry of urban commercial banks, realize the nationwide exhibition industry, and help the company accelerate the promotion of residents’ wealth management business. The Bank Of Ningbo Co.Ltd(002142) retail loans are mainly consumer loans. As of the end of 21h1, the balance of consumer loans accounts for 64% of retail loans. Consumer finance business is expected to become a new performance growth point of the company.
The bank actively distributes the consumer finance company, which is the main force in the development of the industry. At present, 30 consumer finance companies have been established, Among them, 19 banks are consumer finance companies (the largest shareholder is the bank). Among the banks that have disclosed data in 2021h1, the top three asset sizes are China Merchants Bank Co.Ltd(600036) Zhaolian consumer finance (129.8 billion yuan), Industrial Bank Co.Ltd(601166) Xingye consumer finance (52.1 billion yuan) and Bank Of China Limited(601988) BOC consumer finance (37.9 billion yuan). In the first half of the year, the net profit attributable to the parent company reached 1.542 billion yuan, 1.024 billion yuan and 532 million yuan. The company won Huarong Xiaojin this time and became the 15th urban commercial firm with Xiaojin license.
Investment suggestion: leading regional urban commercial banks, high performance supporting overestimation
The company is located in the developed areas of Jiangsu and Zhejiang, with rich residents and good social credit environment, which provides a natural fertile land for the development of wealth management business. In December this year, the company’s allotment landed, and the core Tier-1 capital was effectively supplemented. At present, the company has capital, large asset allocation space and strong risk control ability. We are optimistic about its business development space and profit release prospects. It is expected that the performance growth rate of the company in 2021-23 will be 25.70% / 22.71% / 18.19%. Based on the opening of asset expansion space after the allotment, Xiaojin helped further wealth management and gave the 2022 target PB2 2X, the target price is 52.32 yuan, maintaining the “buy” rating.
Risk warning: insufficient credit demand, fluctuating credit risk, and the transfer progress is less than expected
