\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 128 Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) )
The interest rate spread continued to rise and the performance continued to improve. In 2021, the growth rates of revenue, PPOP and profit were 16.3%, 19.1% and 21.3% respectively. The growth rate increased by 3.4pc, 6.8pc and 2.3pc compared with the first three quarters. According to the company’s preliminary statistics, the growth rate of 22q1 revenue and profit further increased to 19% and 23%, continuing the improvement trend. In 2021, roe and ROA were 11.62% and 1.03%, with a year-on-year increase of 1.28pc and 0.05pc.
1) Q4 interest margin continued to improve, supporting the growth rate of net interest income in a single quarter to increase 6pc to 24.6%. 21. The annual net interest margin (3.06%) increased by 3bps compared with the first three quarters, and has increased quarterly since Q2. The increase of Q4 interest margin is mainly due to the gradual “balance” of small and micro competition and the stabilization and slight rise of loan interest rate. In the 21st century, the annual loan interest rate was 6.24%, an increase of 2bps over 21h, of which corporate (4.92%) increased by 3bps and retail (7.34%) only decreased by 4bps. It is expected that the interest margin of 22q1 may still have some downward pressure, mainly due to the reduction of LPR + the impact of the epidemic + more public investment in Q1 structure. However, with the dividend of the reform of deposit self-discipline mechanism, the deposit cost is expected to continue to decline and form a hedge. With the acceleration of micro lending in the second half of the year, the interest margin is expected to stabilize marginally.
2) the annual non interest income increased by 56.6% year-on-year, accounting for 12.6% of the revenue, mainly due to: a. the good bond investment income and the increase of fund allocation (+ 5.6 billion to 13.5 billion) in the second half of the year, driving the annual investment income (520 million) to increase by 210 million year-on-year; B. The income of financial management and other businesses increased rapidly + the expenses such as “code payment” decreased, and the net income of handling fees and commissions (240 million), a year-on-year increase of + 61%.
3) the cost income ratio (41.4%) increased slightly by 0.9pc month on month compared with Q3, in which the employee expenses were + 20.5% year on year, in which the number of employees was relatively stable (4243 at the end of the year, basically the same as at the beginning of the year), or mainly due to the low base number of 20 years (some employee expenses were reduced under the epidemic support policy). On a year-on-year basis, after the personnel recruitment and training of each department were in place, the production capacity was released significantly this year, and the cost income ratio decreased by 1.4pc year-on-year.
4) with the steady improvement of asset quality, the provision for the whole year (1.74 billion) increased by 16.2% year-on-year, including 600 million less loans and 800 million more other assets, so as to enhance the ability to resist broad risks. Business: Based on the steady progress of micro loan strategy, wealth management, inclusive finance pilot zone and asset securitization will blossom in 2021 to enrich the source of income.
1. The micro loan strategy continued to be promoted, and the proportion of credit continued to increase. At the end of the year, the proportion of personal loans exceeded 61% (increased by 4pc throughout the year). From the perspective of sub items, Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) micro loan business has been steadily promoted:
1) personal business loans increased by 16.3 billion to 64.9 billion compared with the beginning of the year, of which Q4 steadily increased by 3.6 billion, accounting for 39.8% of the total loans compared with the beginning of the year;
2) among personal business loans, the proportion of credit loans increased by 6.9pc to 25.5% (including 4.4pc in the second half of the year), and the non-performing rate of credit business loans was only 0.52% (lower than 0.94% of business loans as a whole), which decreased steadily by 4bps compared with 21h.
3) the number of individual business loans reached 190000, with a steady increase of 40000 throughout the year (including 10000 in Q4). The average household loan scale remained at about 340000, and continued to be small and scattered.
Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) under the mature micro loan business model, small and decentralized credit loans are the main direction of “dislocation competition” with large state-owned banks. We expect that it will continue to strategically increase the investment of credit micro loans in the future, which will help to maintain its advantage of interest rate spread in the medium and long term.
2. Based on the micro loan business, in 2021, under the leadership of the management, Changshu innovated and piloted from multiple business perspectives to better serve customers and enrich revenue sources.
1) the inclusive finance pilot zone has been promoted rapidly. With Changshu’s local deposit and loan market accounting for 30% and 16%, this year Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) officially launched the pilot of Inclusive Finance pilot zone, and established four pilot zones in the “blank area” around Changshu. Without adding new personnel and outlets, a team was formed from Changshu to provide “pure increment” of comprehensive financial services including micro loan, corporate and financial management, which has achieved very good results, It has further increased production capacity and has broad development space.
2) enrich the sources of medium income: accelerate asset securitization and enrich the varieties of investment business. On the basis of a 24% increase in loans to 162.8 billion, ABS transfer out has been strengthened this year, with a year-end balance of 9.15 billion (of which 8.6 billion has been transferred out in 21 years). While obtaining medium income, the control of loan delivery is more flexible (considering that the loan delivery will be greater this year after transfer out); In addition, Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) increased fund allocation (+ 5.6 billion) in the second half of the year, enriched investment varieties, increased investment returns and improved medium income.
3) fully launch wealth management. The differentiated marketing service scheme was launched for different customer groups. By the end of the year, there were 2422 private bank customers (year-on-year + 21%), and the Aum of private bank was 7.8 billion, with a per capita AUM of 7.33 million yuan.
Asset quality: the generation rate of non-performing assets was only 0.36%, and the provision coverage exceeded 530%.
The year-end non-performing ratio (0.81%) and the proportion of special loans (0.89%) were basically the same as those at the end of September, and the proportion of overdue loans (0.90%) decreased steadily by 2bps compared with the end of September. From the dynamic point of view, the non-performing generation rate and overdue generation rate after write off are only 0.36% and 0.46%, which remain at a very low level.
It is worth noting that while the overall asset quality improved, Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) also recovered 410 million previously written off loans (nearly doubled year-on-year) and made up the provisions in 21 years.
In terms of classification, the non-performing ratio of corporate loans (0.96%) further decreased significantly by 0.45pc compared with 21h, the non-performing ratio of retail loans remained at a low level of 0.77%, and the operating loans (0.94%) decreased steadily by 2bps.
At the end of the year, the provision coverage ratio (531.8%) and the allocation loan ratio (4.33%) increased steadily by 10.5pc and 0.1pc respectively compared with the end of September. With the rapid growth of performance and the steady improvement of asset quality, Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) increased the provision for non credit assets, and calculated that the proportion of provision / (non-standard + credit debt on the balance sheet) for non credit assets increased significantly by 3.3pc to 6.22% compared with the beginning of the year.
Investment suggestion: on the whole, Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) 2021 has achieved outstanding performance, and the micro loan strategy and scale expansion have been steadily promoted. In the future, with the stabilization of the interest rate of new loans, the interest margin is expected to remain stable to ensure the steady growth of performance. In addition, the issuance plan of 6 billion convertible bonds has replied to the feedback of the CSRC on March 29, and it is expected to be implemented gradually in the future. The tentative forced redemption ratio of the plan is 130%, and the revised terms are set, showing a positive willingness to convert shares. According to the static calculation, after the successful issuance, the capital adequacy ratio can be increased by more than 3pc, and the conversion of shares will supplement the core Tier-1 capital, further support the rapid development of its micro loan business and open the space for medium and long-term expansion. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be 2.652 billion, 3.225 billion and 3.937 billion respectively. At present, the stock price corresponds to only 1.04x and 0.94x of 2021 and 2022pb, maintaining the “buy” rating.
Risk tip: the epidemic affected the accelerated decline of macro economy, the shift of monetary policy exceeded expectations, the competition of micro loan business exceeded expectations, and the progress of refinancing was less than expected.
