BANK OF SUZHOU(002966) 长江证券·2024-12-04 00:23Investment Rating - The report gives a "Buy" rating for Suzhou Bank (002966 SZ) with a 2024 PB valuation of 0 69X [2][4] Core Views - Suzhou Bank is steadily moving towards its "Trillion Suzhou Bank" goal under its new three-year strategy starting in 2024 with accelerated expansion in non-local markets [2][4] - The bank has clear growth potential in credit scale with short-term focus on corporate loans and long-term emphasis on retail loans [2][4] - It maintains a robust risk preference and excellent asset quality with a non-performing loan (NPL) ratio of 0 84% as of September 2024 [7] - The bank's management has shown strong commitment through two rounds of share purchases totaling over 7 75 million yuan and maintains a stable dividend payout ratio of around 30% [2][4] Strategic Expansion - Suzhou Bank aims to achieve a total asset size of 1 trillion yuan by 2026 or 2027 with an annualized compound growth rate of 18 4% or 13 5% respectively [4][38] - The bank is expanding its presence across Jiangsu Province with the approval of its Xuzhou branch in May 2024 bringing its total branches to 182 [38][39] - Non-local loans now account for over 40% of total loans with a 19% growth in non-local loans as of June 2024 [4][38] Credit Growth and Asset Quality - Corporate loans including bills accounted for 72% of total loans as of September 2024 with significant growth in infrastructure and government-related loans [5] - Retail loans decreased by 5 5% in the first three quarters of 2024 due to risk control measures particularly in personal business loans [5] - The bank's NPL ratio remained stable at 0 84% as of September 2024 with a low net NPL formation rate of 0 59% [7] - Asset quality is stringent with no gap between Stage 3 loans and NPLs and minimal Stage 3 financial investments [7][28] Profitability and Valuation - The net interest margin (NIM) was 1 41% in the first three quarters of 2024 reflecting a conservative risk preference [6] - The bank's 2024 expected dividend yield is 5 33% with a stable dividend payout ratio of around 30% [2][4] - The report forecasts a 2024 PB valuation of 0 69X and a PE valuation of 6 0X based on the closing price on November 29 2024 [8][109] Regional Economic Advantages - Suzhou Bank benefits from the strong economic foundation of Suzhou City which ranks sixth in GDP nationally and has a robust manufacturing sector [48][49] - The bank's loan market share in Suzhou is approximately 3 5% with potential for growth as the bank expands its asset size and capacity to undertake large projects [43][48]