Bank Of Shanghai(601229) 华泰证券·2024-12-22 06:45Investment Rating and Core Views - The report initiates coverage on Shanghai Bank with a "Buy" rating and a target price of RMB 10.59, implying a 2025 target PB of 0.60x [5] - Shanghai Bank is positioned as a stable dividend stock with attractive valuation and dividend yield (5.31% as of 2024/12/20, ranking 7th among 42 listed banks) [5] - The bank is one of China's 20 systemically important banks, with total assets reaching RMB 3.23 trillion as of September 2024, ranking third among city commercial banks [5] Asset Structure and Loan Composition - Shanghai Bank's asset structure is balanced, with loans and financial investments accounting for 43% and 42% of total assets respectively as of September 2024 [1] - Corporate loans dominate the loan portfolio, maintaining over 60% share, while retail loans increased from 16% in 2015 to 32% by 2022 before slightly declining due to weaker demand [1] - The bank's loan portfolio is concentrated in the Yangtze River Delta region, with 78.6% of loans allocated to this area as of June 2024 [63] Deposit Structure and Funding Costs - Shanghai Bank's deposit-to-liability ratio improved to 60% in H1 2024, up 8 percentage points from 2016, though still lower than peers [12] - The bank maintains a high current deposit ratio of 34%, supported by pension customer deposits and corporate deposits [12] - Funding costs are relatively low, with interest-bearing liability costs at 2.16% in H1 2024, ranking fifth lowest among peers [23] Profitability and Asset Quality - Net interest margin stood at 1.19% in H1 2024, ranking second lowest among city commercial banks [23] - Asset quality has improved significantly, with NPL ratio declining from 1.25% in 2022 to 1.20% in 2024E [28] - The bank's credit cost is expected to continue improving, supporting profit growth [19] Business Strategy and Growth Drivers - Shanghai Bank is shifting its corporate loan focus from real estate to infrastructure, new economy, and technology sectors [40] - Technology-related loans grew 35% YoY to RMB 140.3 billion as of December 2023, accounting for 16.9% of total loans [42] - The bank is leveraging its regional advantages in Shanghai's technology innovation zones, serving over 30% of enterprises in the "Da Linghao Bay" area [42] Retail Banking and Digital Transformation - Retail loan growth has been supported by mortgage and personal business loans, offsetting the decline in consumer loans [9] - The bank's joint loan business has stabilized after regulatory adjustments, with risk control models improving over time [47] - Personal business loans reached RMB 119.6 billion as of December 2023, accounting for 8.7% of total loans [9] Regional and Competitive Positioning - Shanghai Bank operates in a highly competitive market, with 237 branches in Shanghai and 351 branches nationwide [76] - The bank benefits from its strong presence in the Yangtze River Delta region, which has lower NPL ratios compared to other regions [63] - Despite intense competition, the bank maintains strong customer relationships and cost advantages in its core markets [23]