BANK OF NANJING(601009)：4Q23 AND 1Q24 EARNINGS GROWTH LARGELY IN LINE-格隆汇

机构：中银国际
研究员：Eric HU/Emma XING

　　Bank of Nanjing (BONJ)’s attributable net profit increased 0.5% YoY in 2023, largely in line with our expectation. Its attributable net profit declined 6.4% YoY in 4Q23, mainly due to slow growth in operating income, lower than 2.1% YoY growth in 9M23. BONJ resumed earnings growth in 1Q24 with its net profit increasing 5.1% YoY in 1Q24. It maintained an excellent assets quality as its NPL is at the low-end level among peers. We noted that its NPL ratio was 0.83% in 1Q24, lower than 0.9% in 2023 and 0.9% in 2022. The risk for LGFV was quite low thanks to the solid financial position of Jiangsu provincial government and local governments. As of end-March 2024, its loans/deposits increased 6.8%/3.7% from end-2023. Its ROAE remained at the high- end level among peers in 2023. BONJ is now trading at 0.63x 2024E P/B, which, in our view, is undervalued. Maintain BUY rating.
　　Key Factors for Rating
　　We expect BONJ to maintain excellent asset quality in 2024. We noted that its NPL ratios were 0.9%/0.83% in 2023/1Q24, against 0.9% in 2022. We expect its NPL ratio to drop to 0.82% in 2024, still at the low-end level among peers. Its special mention ratio dropped from 1.17% in 2023 to 1.04% in 1Q24. Meanwhile, its allowance to NPLs may reach 357% at end-December 2024, down from 360.6% at end-December 2023.
　　BONJ’s scale will expand decently in 2024. We expect its loan and deposit will increase 15% YoY and 9% YoY in 2024, against YoY growths of 16.2% and 10.7% in 2023, mainly thanks to its active business expansion strategy and a positive shift in PBOC’s monetary policy stance.
　　NIM will decline in 2024. BONJ’s NIM decreased 15bps YoY to 2.04% in 2023. As BONJ will further strengthen its financial support to the real economy, its NIM may drop another 10bps in 2024.
　　Valuation
We expect its ROAE to reach 12.6% in 2024. In our view, given its solid fundamentals, BONJ should trade at high-end valuation among its joint-stock bank and city commercial bank peers. We raised our target price from RMB11.54 to RMB11.76, based on 0.80x 2024E P/B. Maintain BUY rating.