QILU BANK(SH:601665) Minsheng Securities·2024-06-30 05:30Investment Rating - The report initiates coverage with a "Buy" rating for Qilu Bank, with a target price of 4.91 CNY based on a 0.6x PB for 2024 [3][4]. Core Views - Qilu Bank is positioned to benefit from a robust economic environment in Shandong Province, with strong credit demand supported by multiple policies, leading to sustained asset growth [3][28]. - The bank's net interest margin is expected to remain stable due to a high proportion of time deposits, which will benefit from the reduction in deposit rates [3][27]. - Asset quality is improving, with a strict recognition standard for non-performing loans, indicating potential for further declines in bad loans [3][27]. Summary by Sections 1. Expansion Potential - Qilu Bank has a significant expansion potential due to its advantageous location in Shandong, where the economic scale is large but the leverage ratio is relatively low [28][29]. - The bank's total assets reached 624.8 billion CNY as of Q1 2024, with a steady growth trajectory [15][24]. - The bank's capital adequacy ratio stands at 10.23%, providing a solid foundation for further expansion [3][45]. 2. Economic Environment - Shandong Province's GDP reached 9.2 trillion CNY in 2023, ranking third nationally, with a growing third industry contributing 53.8% to the GDP [29][31]. - The province is undergoing a transformation with policies aimed at enhancing advanced manufacturing and infrastructure development, which will drive credit demand [36][39]. - Qilu Bank's asset scale is relatively small compared to its peers in Zhejiang Province, indicating room for growth [41][43]. 3. Profitability Analysis - The bank's net profit attributable to shareholders is projected to grow from 4.234 billion CNY in 2024 to 6.188 billion CNY by 2026, reflecting a compound annual growth rate of 12.9% [4][3]. - The bank's net interest income accounted for 73.3% of total revenue in Q1 2024, with non-interest income gradually increasing its contribution [50][52]. - Qilu Bank's return on assets (ROA) and return on equity (ROE) are expected to remain competitive, supported by a strong loan growth strategy focused on corporate lending [21][56].