HZBank(600926) 长江证券·2025-05-05 03:12Investment Rating - The investment rating for Hangzhou Bank is "Buy" and is maintained [9]. Core Views - Hangzhou Bank's Q1 2025 revenue growth is 2.2%, with a net profit growth of 17.3% and net interest income growth of 6.8%. The bank's loan and deposit growth is strong, with loans increasing by 6.2% and deposits by 6.0% compared to the beginning of the year. It is expected that the credit growth will continue to maintain double-digit growth throughout the year. The non-performing loan ratio remains stable at 0.76%, and the coverage ratio is at 530%, indicating strong asset quality [2][6]. Summary by Sections Financial Performance - In Q1 2025, Hangzhou Bank's net interest income increased by 6.8%, driven by stable net interest margins and strong balance sheet expansion. Non-interest income decreased by 5.4% year-on-year, primarily due to a high base from the previous year and fluctuations in the bond market, which led to an 18.0% decline in investment income. However, fee income grew by 22.2% [12][20]. Scale and Growth - Total assets grew by 5.2% compared to the beginning of the year, with loans increasing by 6.2%. Corporate loans grew by 9.7%, supported by strong infrastructure demand in developed regions. Retail loans saw a slight decline of 1.3%, but mortgage lending is expected to continue its recovery throughout the year. Deposits increased by 6.0%, with corporate deposits growing by 6.6% and retail deposits by 6.5% [12][20]. Interest Margin - The cost of liabilities continues to improve, alleviating downward pressure on interest margins. The net interest margin for the full year 2024 is expected to be 1.41%, with a stable trend observed since Q4. The cost of deposits is projected to decline by 15 basis points year-on-year, contributing to the expected growth in net interest income [12][20]. Asset Quality - The bank maintains excellent asset quality, with a non-performing loan ratio stable at 0.76% and a coverage ratio of 530%. The net generation rate of non-performing loans for 2024 is expected to be 0.80%, reflecting retail risk fluctuations, but remains at a good level compared to peers. The bank's low exposure to internet loans and partnerships with leading institutions suggest manageable risk levels [12][20]. Investment Recommendation - The bank's performance is expected to maintain high-quality growth, with current valuations significantly undervalued. The projected dividend per share (DPS) is expected to grow by 25% year-on-year, and the compound dividend yield over the next three years is anticipated to lead the industry. The stock price is close to the convertible bond redemption price, indicating potential upward valuation after the bond is absorbed [12][20].