\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 128 Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) )
Event:
On March 9, Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) released the operating data from January to February 2022, achieving an operating revenue of 1.668 billion, a year-on-year increase of 27.9%, and a net profit attributable to the parent company of 481 million yuan, a year-on-year increase of 25.6%.
Comments:
Revenue and profit maintained a high growth rate and rose to a higher level. From January to February 2022, Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) revenue and net profit attributable to parent company increased by 27.9% and 25.6% year-on-year respectively, 11.67 and 4.51 PCT higher than that in 2021; The profit growth rate was also significantly higher than that of 1q in 2024 by 8.5% year-on-year. Considering the current good economic situation in Jiangsu, it is not ruled out that the year-on-year growth rate of revenue and profit in the first quarter of this year will continue to increase compared with that from January to February. We expect that the better profit performance from January to February is mainly related to the significant year-on-year increase in credit and the strong resilience of the price system.
Credit supply and demand were booming. New loans from January to February exceeded those in the first quarter of last year, and credit supply “made a good start” than expected. By the end of February 2022, the balance of Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) loans was 172.3 billion yuan, an increase of about 9.5 billion yuan over the beginning of the year, compared with 7.825 billion yuan in the first quarter of last year. At this stage, the company’s credit supply is much higher than that in the first quarter of last year, showing the characteristics of “booming supply and demand”. It is expected that the growth of personal operating loans is good, reflecting the significant effect of the company’s significant expansion of customer base, Epitaxial expansion is sustainable. Fitting the credit growth of 1q this year, it is estimated that the year-on-year growth rate of 1q credit is expected to reach about 27%, which continues to increase compared with the year-on-year growth rate of 24% in 2021.
The loan pricing system is expected to be stable and Nim can be maintained. From the perspective of pricing, considering that the year-on-year growth rate of single quarter revenue in the fourth quarter of last year was 26.6%, and the year-on-year growth rate of 27.9% revenue from January to February this year was roughly the same as our estimated growth rate of 1q loan, the company’s revenue contribution was mainly due to scale expansion. It is expected that the overall price system is stable and Nim is relatively stable. From the perspective of liabilities, the company’s deposit balance at the end of February 2022 was 204.2 billion, an increase of 11.6% over the beginning of the year, which was much higher than that at the loan end (+ 5.8%). It is estimated that the upward pressure on the cost of the liability end is relatively limited, and the high increase in deposits may also be related to the seasonal effect of the Spring Festival. On the whole, the asset side of the company is expanding on high priced varieties of credit, while the loan structure is inclined to high priced products. The liability side can effectively control costs, and the net interest margin of the company has a stable foundation.
The asset quality continued to perform well, the non-performing rate remained low, and the provision coverage decreased 11pct to 521%. By the end of February 2022, Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) NPL ratio was 0.81%, basically unchanged from the beginning of the year and remained at a low level. The provision coverage rate was 520.98%, which was about 11pct lower than that at the beginning of the year, but it was still in the forefront of listed banks. Since February is not the end of the quarter, considering the seasonality of provision, it is estimated that there will be centralized provision in March, and the level of provision coverage will not decrease significantly compared with the end of 2021.
For the follow-up situation, we continue to be optimistic about the performance of Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) stock price for three reasons:
Reason 1: Jiangsu has obvious regional advantages, the company’s credit supply is “prosperous in both supply and demand”, and the asset quality continues to improve. Since the beginning of this year, although the downward pressure on China’s economy is still large, the economic performance of Jiangsu Province is still good, and the credit supply is “prosperous in both supply and demand”. In January, the growth rate of medium and long-term credit to the public remained nearly 20%, ranking first among 31 provinces, cities and regions in China Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) more than 85% of the credit is provided in Jiangsu Province. The scale of new RMB loans from January to February this year has exceeded the level of the first quarter of last year, which has also laid a good foundation for the stability of the company’s annual net interest income and asset quality. At present, Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) new non-performing loans to the public have been basically cleared, and the stock of problem assets is gradually digested. The non-performing rate of retail loans has always remained below 0.8%, and the non-performing rate of personal operating loans has remained below 1%. The overall non-performing rate is expected to remain at a low level.
Reason 2: Pratt Whitney’s small and micro businesses are squeezed and weakened by large banks, and the loan pricing is more stable. In the past, when banks engaged in inclusive small and micro businesses, especially in the case of intensified competition in Jiangsu, large banks, based on their own debt cost advantages, tended to seize customers by “reducing prices”, which would also have a certain impact on local corporate banks. However, from this year’s situation, the government work report does not make specific quantitative requirements for the growth rate of inclusive small and micro loans of large banks, while the growth rate of inclusive small and micro loans is required to be more than 30%, 40% and 30% from 2019 to 2021. This reflects that while guiding banks to increase financing support for Pratt & Whitney small and micro enterprises, regulators also began to pay more attention to the principles of business commercialization and sustainability, rather than blindly pursuing quantity and scale, which helps to prevent Pratt & Whitney small and micro loan interest rate from losing the balance of income and risk due to the “price war”, The development of Pratt Whitney’s small and micro businesses began to switch from “price competition” to “differentiated competition of the track”.
For Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) : (1) Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) has cultivated Pratt & Whitney microenterprises for a long time, formed a relatively mature risk control system and accumulated rich customer data, which has also laid a good foundation for institutional exhibition. (2) Since last year, China began to increase the layout of credit insurance business and make credit sinking, which not only opened up a broader blue ocean market, but also helped to improve the return on assets and NIM. (3) Due to the high proportion of corporate inclusive small and micro loans, the two direct monetary policy tools issued by the central bank can also provide some incentives for Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) .
Reason 3: Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) unique village and town bank model opens space for remote expansion. In recent years, the regulatory authorities have further strengthened the supervision of the remote operation of local corporate banks, and Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) unique investment management Rural Bank model has opened up space for its remote expansion, and the income contribution of rural banks in the group sector is also increasing year by year. At the same time, the micro loan technology with strong replicability also ensures that the asset quality pressure of rural banks is generally controllable.
Earnings forecast, valuation and rating Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) has been deeply engaged in the Pratt & Whitney small and micro market for a long time, focusing on retail and small and micro businesses, with good risk control mechanism. Since the beginning of 2022, the credit supply has been “prosperous in both supply and demand”, the interest margin is expected to be generally stable, the asset quality continues to perform well, and the high provision coverage makes the company have a strong risk offset ability. It is expected that the company will have a good business expectation in 2022. On September 3, 2021, the company’s general meeting of shareholders deliberated and approved the 6 billion convertible bond issuance plan. The company is actively promoting the issuance of convertible bonds. After the subsequent issuance of convertible bonds is successfully implemented, it will help to further thicken the core Tier-1 capital and expand the company’s business space. We maintain the company’s EPS forecast of 0.80 yuan / 0.93 yuan / 1.08 yuan from 2021 to 2023, and the corresponding Pb of the current stock price is 0.99/0.90/0.81 respectively, maintaining the “buy” rating.
Risk tip: the downward pressure on the macro economy is increasing, and the credit easing is less than expected.
