\u3000\u3 China Vanke Co.Ltd(000002) 142 Bank Of Ningbo Co.Ltd(002142) )
Event: Bank Of Ningbo Co.Ltd(002142) released the annual report of 2021. In 2021, the growth rate of revenue was 28.37%, the growth rate of profit before provision was 30.65%, and the growth rate of net profit attributable to parent company was 29.87%. The performance was excellent. Our comments are as follows:
Bank Of Ningbo Co.Ltd(002142) in the fourth quarter of last year, the growth rate of net profit was 38.63%. The main driving factors of performance growth include scale expansion, non interest income growth and cost saving, while the year-on-year narrowing of net interest margin made a negative contribution to profit growth.
The net interest margin decreased month on month and narrowed year on year. It is estimated that the net interest margin of Bank Of Ningbo Co.Ltd(002142) single quarter in the fourth quarter of last year was 2%, down 22bp month on month and year on year, dragging down the growth of net interest income.
① on the asset side, the year-on-year growth rate of total assets reached 23.9% at the end of the fourth quarter of last year, 0.17pc higher than that at the end of the third quarter of 2021, and the scale expansion was further accelerated. In the fourth quarter of last year, the new assets were mainly invested in financial investment assets. On the one hand, it is expected that the issuance of local government special bonds will accelerate in the fourth quarter of last year, and the supply of high-quality assets will increase; On the other hand, in December last year, the central bank lowered the deposit reserve ratio, the interest rate tended to decline, and Bank Of Ningbo Co.Ltd(002142) increased the allocation of bond assets.
In the fourth quarter of last year, the proportion of new loans in total new assets was only 24%, which was significantly lower than that in the same period of previous years. Loans were mainly invested in general corporate credit, and retail credit was relatively small. It is expected to mainly support the development of Pratt & Whitney small and micro businesses. Credit resources are inclined to the business of retail companies, and personal business focus is gradually focused on wealth management.
From the perspective of yield, under the background of supporting the development of the real economy, the interest rate shows a downward trend. Superimposed on the investment of new assets in financial assets with relatively low yield in the fourth quarter of last year and the general inclination to public credit, it is finally expected that the yield of interest bearing assets will decline month on month in the fourth quarter of last year.
② on the liability side, the new liabilities last year were mainly driven by the growth of interbank certificates of deposit in traditional interbank liabilities and bonds payable, which was mainly affected by seasonal factors. The peak season of deposit growth of Bank Of Ningbo Co.Ltd(002142) each year was concentrated in the first quarter, while in the second half of the year, the debt growth mainly depended on active liability instruments, which was basically consistent with the structure of new liabilities in the fourth quarter of the past few years.
From the perspective of the internal structure of deposits, the growth momentum of enterprise deposits is better than that in the same period of previous years, and the cost of enterprise deposits is relatively low, which plays a role in saving deposit costs. However, as the interest payment rate of personal deposits increased significantly in the second half of last year, and the new liabilities are mainly concentrated in high-cost interbank funds, the cost of Bank Of Ningbo Co.Ltd(002142) liabilities is expected to rise in the fourth quarter of last year.
③ on the whole, the decline of asset side yield and the rise of superimposed debt cost finally led to the decline of Bank Of Ningbo Co.Ltd(002142) net interest margin in the fourth quarter of last year. Due to the high base effect in the fourth quarter of 2020, the net interest margin also narrowed significantly year-on-year, which dragged down the growth of net interest income under the background of accelerated expansion of interest bearing assets.
China’s income grew beautifully. In the fourth quarter of last year, Bank Of Ningbo Co.Ltd(002142) fee and commission net income increased by 158.2%, about 141pc higher than that of 21q3, becoming an important driving factor supporting revenue growth.
① from the perspective of fee income, the income of Bank Of Ningbo Co.Ltd(002142) middle income is mainly from agency business, accounting for more than 80%. Thanks to the increasing contribution of funds, insurance and other consignment products to AUM, the income related to wealth management achieved rapid growth in the second half of last year, which has become the main reason for the rapid growth of middle income.
② from the expense side of handling charges, the marketing expenses related to wealth management are concentrated in the first half of last year, and the growth rate of relevant expenses slows down significantly in the next year.
③ looking forward to the future, Bank Of Ningbo Co.Ltd(002142) wealth management business has a good foundation after development in recent years. In recent years, the staffing of wealth management line has been continuously increased, and the production capacity has yet to be released. With the continuous improvement of the big wealth system, the income contribution will be further demonstrated.
Due to the high base effect, the growth rate of other non interest net income in 21q4 slowed down slightly. In the fourth quarter of last year, the growth rate of Bank Of Ningbo Co.Ltd(002142) other non interest net income was 11%, which was lower than that of 21q3, mainly because the interest rate rose rapidly after the second quarter of 2020, and the income related to Bank Of Ningbo Co.Ltd(002142) financial market business was concentrated in the fourth quarter of the year, resulting in significantly lower other non interest net income in the second and third quarters of 2020, while the income in the fourth quarter of 2020 was higher. In 2021, Bank Of Ningbo Co.Ltd(002142) balanced the time point of cashing in the investment related income in the financial market among the quarters, which eventually led to the high growth rate of Q2 and Q3 in 2021, and the growth rate of income decreased in the fourth quarter of last year. From the perspective of the whole year, other non interest net income still increased by 71%.
21q4 cost income ratio decreased year-on-year. In the fourth quarter of last year, Bank Of Ningbo Co.Ltd(002142) cost income ratio was 42.53%, down 4.07pc year-on-year, mainly because in 2020, in order to strengthen the implementation of large retail strategy, the company’s staff team continued to grow and the staff cost increased rapidly; However, the growth of employees slowed down in 2021, and the company focused on capacity improvement, which finally led to a significant year-on-year decrease in the growth of employee expenses in 2021. On the basis of the increase in revenue growth and the year-on-year decrease in cost income ratio, Bank Of Ningbo Co.Ltd(002142) in the fourth quarter of last year, the profit before provision increased by 37.6% year-on-year, further increasing compared with the growth rate of 21q3.
Excellent asset quality. At the end of the fourth quarter of last year, the Bank Of Ningbo Co.Ltd(002142) non-performing rate decreased by 1bp to 0.77% month on month, which is at a low level in the industry. The provision coverage rate increased by 10pc to 525.5% month on month, which has a strong ability to resist risks.
Since the second quarter of last year, the net generation rate of non-performing loans after write off transfer out has shown an upward trend, and the attention rate also increased slightly at the end of the fourth quarter of last year. It is expected that it is mainly affected by the epidemic, the cash flow of some retail customers and small and Micro customers is tight, and the newly generated non-performing and attention loans have increased slightly. The company increased the write off disposal in the fourth quarter of last year. Since 2016, although there has been occasional downward pressure on the macro economy, Bank Of Ningbo Co.Ltd(002142) asset quality fluctuates little and its ability to maintain an excellent level highlights its ability to resist cyclical fluctuations.
Looking forward to 2022, on the basis of the rapid growth of personnel and outlets in the early stage, Bank Of Ningbo Co.Ltd(002142) is expected to achieve rapid expansion of scale, superimposed with the “booming supply and demand” of credit in the Yangtze River Delta, and its asset growth is expected to be at the leading level in the industry. At the same time, non interest income will achieve steady growth with the support of wealth management and proxy trading in the financial market, and the annual performance growth is expected to be better. In the medium and long term, Bank Of Ningbo Co.Ltd(002142) is a model of high-quality expansion and excellent bank. Its core competitiveness is reflected in excellent management system, prominent location advantages and clear business model. Roe will remain stable and have good growth, and should enjoy valuation premium.
Investment suggestion: we expect the company’s revenue growth rate to be 20.74% and net profit growth rate to be 20.1% in 2022. The six-month target price is 49.38 yuan, equivalent to 2.4pb in 2021.
Risk warning: the progress of institutions under non local branches is less than expected; The progress of wealth management transformation is less than expected; Emergencies disrupt the pace of economic recovery.
