BANK OF JIANGSU(600919)：IMPROVED ASSET QUALITY IMPRESSIVE PERFORMANCE

　　The performance of Bank of Jiangsu in 1H23 was remarkable. The Company demonstrated evident regional advantages, superior customer resources, and steady expansion of its business scale. The improvement of asset quality and risk coverage capability further enhanced the overall performance. If the convertible bond can be successfully converted into shares subsequently, there is potential for further valuation recovery.
　　 Event: Bank of Jiangsu reported unaudited 1H23 operating revenue/attributable net profit （ANP） of Rmb38.843bn/17.02bn （+10.64%/+27.20% YoY）， respectively. The nonperforming loan （NPL） ratio decreased by 0.03ppts to 0.91% compared to the end of 2022.
　　 Stable revenue growth rate and continued high profitability.
　　Bank of Jiangsu expects operating revenue growth of 10.64% YoY （compared to 10.35% in 1Q23） and ANP growth of 27.20% YoY （compared to 24.83% in 1Q23）。 Despite facing multiple operational pressures in 2Q23, the revenue of Bank of Jiangsu remained stable and profitable, largely benefiting from cost savings due to continuous improvements in asset quality. The annualized weighted return on equity （ROE） for 1H23 was 18.20%, a YoY increase of 2.11ppts, driven by significant profit growth.
　　 Stable asset expansion and impressive deposit growth.
　　At the end of the first half of 2023, the Company's total assets were Rmb3.29trn, up 10.55% compared to the end of 2022, mainly benefiting from the active expansion of the balance sheet in 1Q23. At the end of 1H23, deposits and loans were Rmb1.85trn/1.75trn, respectively, +13.77%/+8.84% compared to the end of 2022 （the growth of deposits and loans at the end of 1H22 was +12.31%/+9.59% respectively compared to the end of the previous year）。 The bank's focus on corporate settlement funds and the strong promotion of wealth management has contributed to impressive deposit growth in 1H23.
　　 Asset quality and risk coverage capability improved further.
　　In 1H23, the NPL ratio of the bank was 0.91%, a decrease of 0.01ppts compared to the end of 1Q23 and a decrease of 0.03ppts compared to the end of 2022, continuing the trend of quarterly improvement since 2020. The provision coverage ratio reached 378.09% at the end of 1H23, an increase of 6.43pps from the end of 2022, indicating strengthened risk coverage. capability.
　　 If the convertible bond can be successfully converted into shares subsequently, there is potential for further valuation recovery. By Jun 30, the amount of unconverted convertible bond of the bank was Rmb15.525bn. The latest conversion price is Rmb5.48 per share and the forced conversion price is Rmb7.13 per share （callable if the closing price is no less than the level in 15 out of 30 consecutive trading days; the price of the stock already met the range over the latest four trading days）。 If the conversion is completed subsequently, it will relieve the capital pressure and facilitate business expansion, which may open up room for rerating.
　　 Potential risks:
　　Macroeconomic growth falling faster than expected; asset quality deteriorating significantly; substantial fluctuations in regional economic conditions; execution of the bank's strategic plans missing expectations; adverse changes in regulatory and industry policies.
　　 Investment recommendation: Improved asset quality, impressive performance.
　　The performance of Bank of Jiangsu in 1H23 was remarkable. The Company demonstrated evident regional advantages, superior customer resources, and steady expansion of its business scale. The improvement of asset quality and risk coverage capability further enhanced the overall performance. If the convertible bond can be successfully converted into shares subsequently, there is potential for further valuation recovery. We maintain the earnings forecast and expect attributable EPS of Rmb1.90/2.21/2.56 in 2023E/24E/25E considering the capital expansion after bond conversion. The current A-share price corresponds to 0.58x 2023E PB. According to the calculation of the three-stage dividend discount model （DDM）， we assign 0.77x 2023E PB to maintain the target price of Rmb9.5, and reiterate the "OVERWEIGHT" rating.
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   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。