Bank Of Chengdu Co.Ltd(601838) (601838)
In 2021, the net profit attributable to the parent company will increase by 18% – 25%
The company issued a performance pre increase announcement, and the net profit attributable to the parent company in 2021 is expected to increase by 18% to 25% year-on-year. The central growth rate was 21.5%, still maintaining a high year-on-year growth rate. Compared with the year-on-year growth of the performance of listed banks in the first three quarters, it is still at the leading level in the industry.
The high growth of the company’s performance is mainly due to the gratifying growth of revenue and the obvious improvement of cost income ratio. The revenue and profit before provision in the first three quarters increased by 26.01% and 27.79% respectively year-on-year, both higher than the year-on-year growth of net profit attributable to the parent company. In addition, the company’s non interest income has performed well this year, with a year-on-year increase of 42.50% in the first three quarters, of which the net income from handling fees and commissions increased by 45.31% year-on-year.
The high growth of credit supply supported the rapid growth of net interest income
Asset side: since this year, the company’s credit supply has maintained a high growth, with a year-on-year growth rate greater than that of assets. Loans at the end of 21q3 increased by 33.01% year-on-year, down 1.76pct from 34.77% at the end of 21q2, much higher than the year-on-year growth of 16.81% of total assets. At the same time, it is also at the first level among the listed urban commercial banks, and the credit supply is expanding actively. From the perspective of net interest income, the year-on-year growth rate in the first three quarters increased by 2.54pct to 22.38% compared with the first half of the year, and the net interest margin widened significantly in the third quarter.
Liability side: Although the year-on-year growth rate of deposits absorbed was weaker than that of loans, it was higher than the total liabilities at the end of 21q2 and 21q3, and the capacity to collect deposits continued to improve. The year-on-year growth rate of total liabilities is basically consistent with that of total assets.
The quality of assets is improving and the provision is thick
At the end of 21q3, the company’s non-performing rate further decreased 4bp to 1.06%, the lowest level in recent seven years. At the same time, the proportion of loans decreased 8bp to 0.56% month on month, and the pressure of hidden non-performing loans was reduced. While continuously compacting the asset quality, the company’s provision coverage continues to maintain a high level; 21q3 increased by 16.26pct to 387.41% month on month (MOM) at the end of the year, ranking fifth among listed urban commercial banks, with strong risk offset ability.
The issuance of convertible bonds was approved, and the capital ammunition was replenished in time
High asset growth led to excessive consumption of the company’s core tier 1 capital. At the end of 21q3, the company’s core tier 1 capital adequacy ratio fell 52bp to 8.23% month on month. Insufficient capital is likely to restrict credit expansion. The company issued a plan for issuing convertible bonds on April 28, 2021 and obtained the approval of the CSRC on December 27 after eight months. The issuance scale of the company’s convertible bonds is 8 billion yuan. According to static calculation, the core Tier-1 capital adequacy ratio of 1.53 PCT can be supplemented after issuance to provide capital ammunition for credit.
Investment suggestion: benefit from the construction of Chengdu Chongqing double circle, with high growth and distinctive characteristics
The company takes root in Chengdu, one of the twin engines of economy in Southwest China, and benefits from the national development strategy of Chengdu Chongqing twin city economic circle construction, so the future development space is very broad. In addition, the issuance of corporate convertible bonds is imminent, and there are markets and capital for credit expansion. We are optimistic about the company’s future performance growth. We predict that the performance growth rate from 2021 to 2023 will be 22.03% / 20.04% / 18.38%, and give it a target valuation of 1.15 times Pb in 2022. The corresponding target price will be raised from 14.56 yuan / share to 16.72 yuan / share, maintaining the “buy” rating.
Risk warning: the epidemic repeatedly affects macroeconomic recovery, weak credit demand and credit risk fluctuation
