Bank of Nanjing (601009): The dividend rate remains the industry’s first echelon core profitability has improved significantly

Bank of Nanjing (601009): The dividend rate remains the industry’s first echelon core profitability has improved significantly

Event: Bank of Nanjing disclosed its 2018 annual report and 2019 first quarter report.

In 2018, it achieved operating income of 27.4 billion yuan, an increase of 10 in ten years.

3%; net profit attributable to mothers was RMB 1.11 million, a year-on-year increase of 14.

5%.

In the first quarter of 19, operating income reached 87 trillion, with a long-term growth of 29.

7%; net profit attributable to mothers was 330,000 yuan, a year-on-year increase of 15.

1%, the performance of the first quarter report is slightly expected (the original forecast 1Q19 北京桑拿洗浴保健 return to the mother net profit increased by 14 per year).

6%).

The non-performing ratio in the first quarter of 19 was 0.

89% quarter-on-quarter.

Under IFRS9 Accounting Standards, it is expected that Nanjing Bank’s off-balance sheet provisions will be more fully covered, and it should have full confidence in its asset quality.

From the perspective of asset quality results indicators, Bank of Nanjing benefited from being the first to stabilize and improve the economic asset quality of the Yangtze River Delta region. Compared with its peers in Nanjing, in 2018, Nanjing strengthened its non-performing identification standards. Loans / non-performing income overdue for more than 90 days fell by 18, which was earlier than the previous quarter.It fell by three minimums to 94%, and the bad generation rate in 2018 was only 重庆耍耍网 74bps. In 1Q19, the bad rate in Nanjing remained flat at 0 quarter-on-quarter.

89%, 1Q19 attention rate quarter-on-quarter increased slightly by 2bps to 1.

44%, the overdue rate at the end of 2018 increased slightly by 3bps to 1 from the mid-term.

32%, the absolute level is still quite low.

The market is concerned about the quarter-on-quarter decline in its 1Q19 provision coverage ratio shifted to 415%. We judge that based on the principle of prudent full coverage of provisions under the new accounting standards, it is expected that Nanjing Bank will switch the chart on January 1, 2019.Provisions were improved and reduced, and in the first quarter, provision was mainly made for surface surgery, so credit impairment losses in 1Q19 could be increased by up to 115%.

We believe that more comprehensive provision coverage will help alleviate the long-standing criticism that the market is opaque to its surgical agenda.

Inter-industry debt repricing factors helped the rebound in net interest margin, and the core profitability at the revenue side was significantly repaired.

In terms of net interest income, 1Q19 Bank of Nanjing’s net interest margin continued to increase by 3bps to 1 quarter-on-quarter.

96%.

The analysis of the change in net interest margin showed that the net interest margin of Nanjing Bank in 2H18 remained flat at 1.

90%, the asset-end structure and interest rate factor resonance positively contribute 10bps, of which 2H18 on public debt and retail loans 1H18 up 9bps and 31bps to 5 respectively.

37% and 6.

30%, the proportion of retail loans at the end of 2018 increased by 2 in the medium term.

4 up to 26.

9%.

The cost of deposits on the debt side continued to rise, with 2H18 up 19bps to 2 from 1H18.

47%, but the contribution of the interbank resistance and the interest rate of bonds payable to the net interest margin has changed from negative to positive.Will continue to be released.

In terms of non-interest income, through switching accounting standards in 1Q19, non-interest income in Nanjing increased by 129% in more than ten years. What is more noteworthy is that in 1Q19, the net fee income in Nanjing exceeded 8%.

8% compared to 2018 (2.

8%) obviously repaired.

Regardless of whether accounting standards are adopted, the growth rate of revenue and the growth rate of PPOP are necessarily comparable and more truly reflect the core profitability of banks.

In the first quarter of 19, the growth rate of Nanjing revenue and PPOP exceeded 29, respectively.

7% and 36.

8%, up from 10 in 2018.

3% and 11.

Significant improvement of 6%.

Company’s point of view: The Bank of Nanjing reported a significant recovery in revenue in the first quarter, asset quality remained stable, and provisions were more comprehensive and true.In addition, the dividend rate in 2018 remains at the level of 30% of the first echelon of listed banks. Concerned that the adjustment of refinancing supervision regulations, the core tier 1 capital supplement window will be opened again.

The current maximum corresponding to 19 years is only 0.

95X PB, a 42% discount from the previous Ningbo Bank, is an undervalued high-quality stock worth grasping.

We estimate that the growth rate of net profit attributable to mothers of Nanjing from 2019 to 2021 will be 18.

0%, 18.

8%, 18.

8% (maintain profit forecast, supplement 2021 forecast), maintain “Buy” rating, reallocate stocks to the top of the portfolio.

Risk reminder: adverse risks caused by economic substance.