ab 13 March 2025 Global Research First Read China Banks US marketing feedback: Warmer sentiment towards China; Modest positioning increase LO still hesitant; Macro funds active; PB saw some fund flowing into China In our US marketing trip last week, we met c30 institutions, with c 40% being EM long- only funds, 40% EM-focused hedge funds, and the rest 10-20% macro funds. Though still underweight on China, US investors' sentiment appear warmer towards China market, particularly in AI/ tech/ Internet sectors. ...

Investment Rating - The investment rating for Ping An Bank is maintained at Buy-A with a 6-month target price of 14.17 CNY, compared to the current stock price of 11.97 CNY [4]. Core Views - Ping An Bank's revenue growth is under pressure due to ongoing transformation and restructuring, with a reported revenue decline of 10.93% year-on-year for 2024 [1]. - The bank's net profit attributable to shareholders decreased by 4.19% year-on-year, indicating a divergence between revenue and profit growth [1]. - The bank's asset quality shows signs of improvement, with a decrease in the non-performing loan generation rate to 1.8% in 2024, down 9 basis points year-on-year [10][12]. Summary by Sections Financial Performance - In 2024, Ping An Bank's operating revenue was 146.695 billion CNY, with a projected revenue decline of 7.76% for 2025 [14]. - The bank's net profit for 2024 was 44.508 billion CNY, with an expected slight increase to 44.899 billion CNY in 2025 [14]. - The bank's net interest margin for Q4 2024 was reported at 1.70%, down 41 basis points year-on-year [3][9]. Asset Quality - The non-performing loan ratio remained stable at 1.06% as of Q4 2024, with improvements in various loan categories [33]. - The bank has increased its provision coverage ratio, maintaining a stable credit cost despite the pressure on profit growth [10][12]. Retail Business - The retail business is undergoing structural adjustments, with a focus on reducing high-risk loans, leading to a decline in retail credit [2][12]. - The bank's retail assets under management (AUM) showed slight growth, benefiting from improved market conditions in Q4 2024 [11][37]. Credit Growth - New credit issuance in Q4 2024 was 5.7 billion CNY, indicating a slight recovery compared to previous quarters, although retail credit remains under pressure [20]. - The bank's overall credit growth is expected to remain weak in 2025, with ongoing efforts to reduce high-risk retail loans [12][13].

Investment Rating - The investment rating for Ping An Bank is "Buy" (maintained) [7][26]. Core Views - Ping An Bank's revenue decline has narrowed, and the bad debt generation has shown a downward turning point [1]. - The bank's 2024 net profit attributable to shareholders decreased by 4.2% year-on-year, with revenue down by 10.9%, but the decline is less severe compared to the first three quarters of 2024 [2]. - The non-performing loan (NPL) ratio at the end of 2024 was 1.06%, remaining stable compared to the end of Q3 2024, with a provision coverage ratio of 251% [1][3]. Summary by Sections Revenue and Profitability - In 2024, Ping An Bank's net profit attributable to shareholders decreased by 4.2%, and revenue fell by 10.9%, but the decline rate has improved by 1.6 percentage points compared to the first three quarters of 2024 [2]. - Other non-interest income grew significantly by 68.7% year-on-year, driven by strong performance in the bond market in Q4 [2]. - The bank's net interest margin (NIM) for Q4 2024 was 1.70%, a significant decrease of 17 basis points from Q3 2024, primarily due to a decline in asset yields [3]. Asset Quality - The NPL ratio, attention rate, and overdue rate at the end of Q4 2024 were stable at 1.06%, 1.93%, and 1.52%, respectively, indicating an improvement in asset quality [4][3]. - The true NPL generation rate improved by 12 basis points to 2.53%, suggesting that the pressure on bad debt generation has peaked and is now declining [4]. Earnings Forecast and Valuation - The forecast for net profit attributable to shareholders for 2025-2027 is expected to grow by -1.11%, 5.07%, and 5.36%, respectively, with corresponding book values per share (BPS) of 23.37, 24.97, and 26.69 yuan [5]. - The current price corresponds to a price-to-book (PB) ratio of 0.51, 0.48, and 0.45 for the years 2025-2027, with a target price of 14.00 yuan per share, indicating a potential upside of 17% [5].

Investment Rating - The investment rating for Ping An Bank is "Buy" and is maintained [7] Core Views - Ping An Bank's revenue decline has narrowed, and the bad debt generation has shown a downward turning point [1] - The bank's net profit attributable to shareholders for 2024 is expected to decrease by 4.2% year-on-year, with revenue declining by 10.9%, but the decline is less severe compared to the first three quarters of 2024 [2] - The bank's non-performing loan ratio at the end of 2024 is 1.06%, remaining stable compared to the end of Q3 2024, with a provision coverage ratio of 251% [1][3] Summary by Sections Revenue and Profitability - In 2024, Ping An Bank's net profit attributable to shareholders is projected to decline by 4.2%, while revenue is expected to decrease by 10.9%, a reduction of 1.6 percentage points compared to the first three quarters of 2024 [2] - Other non-interest income has increased significantly by 68.7% year-on-year, driven by strong performance in the bond market in Q4 [2] - The bank's net interest margin for Q4 2024 is 1.70%, a decrease of 17 basis points from Q3 2024, primarily due to a decline in asset yields [3] Asset Quality - The non-performing loan ratio, attention loan ratio, and overdue loan ratio at the end of Q4 2024 are stable at 1.06%, 1.93%, and 1.52%, respectively, indicating an improvement in asset quality [4] - The real non-performing loan generation rate has improved by 12 basis points to 2.53%, suggesting that the pressure on bad debt generation has peaked and is now declining [4] Earnings Forecast and Valuation - The forecast for net profit attributable to shareholders from 2025 to 2027 is -1.11%, 5.07%, and 5.36%, respectively, with corresponding book values per share of 23.37, 24.97, and 26.69 yuan [5] - The target price is maintained at 14.00 yuan per share, corresponding to a price-to-book ratio of 0.60x for 2025, indicating a potential upside of 17% from the current price [5]

Investment Rating - The report maintains an "Outperform" rating for the banking industry [5] Core Viewpoints - The Zhejiang Rural Credit System has demonstrated significant reform and operational effectiveness, maintaining a strong focus on supporting agriculture and small enterprises, leading to a notable market presence in terms of deposits and loans [1][49] - The system's return on equity (ROE) consistently exceeds that of listed banks, indicating superior cyclical resilience despite a general decline in ROE across both sectors [2][50] - The growth in net profit for the Zhejiang Rural Credit System was 12.5% and 10.0% year-on-year for 2022 and 2023, respectively, driven primarily by rapid expansion and improved non-interest income [3][51] Summary by Sections Reform and Operational Effectiveness - The Zhejiang Rural Credit System has evolved since the establishment of the first rural credit cooperative in 1952, culminating in the formation of the Zhejiang Rural Commercial Bank in 2022, which serves as a model for national reform [1][49] - By the end of 2024, the system's total deposits and loans reached 4.78 trillion yuan and 3.78 trillion yuan, respectively, with market shares of 20.88% and 15.92% [20] Profitability Analysis - The high ROE of the Zhejiang Rural Credit System is attributed to a higher net interest margin compared to the industry, although this advantage has been narrowing due to increased competition from larger banks [2][50] - The system's non-interest income has improved, particularly from investment returns, which have helped offset the pressure from declining net interest margins [3][50] Growth Potential - The Zhejiang Rural Credit System has maintained a loan growth rate exceeding 15%, supported by a strong demand from small and micro enterprises in a robust regional economy [38] - The system's asset quality remains strong, with a non-performing loan ratio of 0.85% and a provision coverage ratio of 486.7% as of the end of 2024, indicating a solid risk management framework [20][47] Asset Quality - The system's non-performing loan ratio has remained low, benefiting from a favorable economic environment and effective risk management practices [44] - Despite a slight increase in non-performing loans due to economic pressures, the overall asset quality remains superior compared to national averages [44][47] Investment Recommendations - The report suggests a focus on high-dividend stocks in a low-interest-rate environment, recommending banks such as China Merchants Bank and Jiangsu Bank for long-term investment [53]

Group 1: Risk Management - The bank adheres to the philosophy that "operating a bank means managing risks," continuously improving a comprehensive risk management system that involves all employees and processes [2] - Unified credit policies are implemented at the business entry level, with ongoing industry research for risk identification and independent credit approval for business transactions [2] Group 2: Net Interest Margin Outlook - The company places high importance on net interest margin management, aiming to stabilize it through optimizing the asset-liability structure and increasing the proportion of demand deposits [2] - Current observations indicate that the net interest margin has shown signs of stabilization [2] Group 3: Dividend Outlook - Stable dividends are considered a crucial component of shareholder returns, with the company committed to creating good returns for shareholders [2] - The profit distribution plan for the new year is still under consideration, with a focus on developing a more proactive and reasonable dividend scheme to enhance investor satisfaction [2] Group 4: Investor Communication - During the reception, the company's representatives engaged in thorough communication with investors, strictly adhering to relevant regulations without disclosing any undisclosed significant information [2]

Group 1: Dividend Outlook - The bank emphasizes stable dividends as a crucial component of shareholder returns, with plans for a more proactive and reasonable dividend scheme in 2025 [2] - The profit distribution plan for the new year is still under consideration, reflecting the bank's commitment to enhancing shareholder value [2] Group 2: Performance in Early 2025 - As of the end of January, the bank reported strong growth in both deposits and loans, with new loan issuance exceeding the same period last year, achieving record highs for both deposit and loan balances [2] - The bank continues to adapt to changing operating environments while focusing on improving service quality to the real economy, particularly in new productive capacities [2] Group 3: Net Interest Margin Outlook - The bank is focused on managing its net interest margin through optimizing its asset-liability structure and increasing the proportion of demand deposits, with current trends indicating stabilization of the net interest margin [2]

大型商业银行（即工商银行、建设银行、农业银行、中国银行、交通银行和邮储银行六家） 2024 年末总 资产达到 190.26 万亿元， 占全部商业银行总资产的 50.00% ，六家国有大行总资产在商业银行中的占比逐年 提升。 2024 年末占比较 2023 年末的 49.81% 上升了 19 个 BP ，较 2022 年末的 48.86% 上升了 114 个 BP 。 近三年， 股份行的资产占比在下降 ， 2024 年占比为 19.50% ，而 2023 年末和 2022 年末的占比分别为 19.98% 和 20.78% 。 截至 2024 年末，我国商业银行 总资产达到了 380.52 万亿元 ，较 2023 年末增加了 25.67 万亿元，同比增 长 7.23% 。 不良贷款方面， 2024 年末，我国商业银行不良贷款余额达到 3.28 万亿元 ，较 2023 年末增长了 1.66% ， 增速较上一年的 8.14% 大幅下降。 大型商业银行 2024 年末不良贷款余额达到 14007.11 亿元 ，占全部商业银行不良贷款的 42.72% 。和总资 产一样，六家国有大行不良贷款余额在商业银行中的占比也逐年提升 ...

Financial Data and Key Metrics Changes - The company reported a net income of $131 million, with a return on assets of 19.1% and a return on equity of 18.8%, which compares favorably with peers and industry averages [6][7] - The net income was impacted by a non-recurring rental expense adjustment of $810,000, which equated to approximately $0.42 on an after-tax basis [7] - Loan growth for the year was 7%, while deposit growth was 3.6%, both moderate compared to previous years but in line with industry averages [7][8] - Non-performing loans decreased from $20 million to $10 million, representing a 50% improvement [9] - The leverage capital ratio improved from 10.85% at the beginning of the year to 11.33% at year-end [11] - Tangible book value per common share increased from $50.54 to $57.86 [11] Business Line Data and Key Metrics Changes - The company experienced a reduction in criticized loans by 33% during the year [9] - The company repurchased 460,000 shares of common stock for a total consideration of $34 million [11] Market Data and Key Metrics Changes - The company noted that the banking industry is experiencing slow growth, with no significant increases in activity anticipated in the near term [7][8] - The company is facing competition from local banks offering special rates, particularly in the Asian community [22] Company Strategy and Development Direction - The company plans to remain flexible in its pricing strategy to compete effectively in the market [22] - The management indicated that buybacks will depend on loan growth prospects, stock pricing, and capital ratios [23] - The company is establishing a new branch in Manhattan, expected to open in March 2025, which will increase occupancy and personnel expenses [47] Management's Comments on Operating Environment and Future Outlook - Management expressed a cautious outlook for the banking industry, expecting moderate growth [7][45] - The management highlighted that while there is still activity, payoff activity has been higher, indicating a lack of sustainable increases in loan activity [46] - The management noted that clients are currently hesitant to invest due to perceived risks, despite having capital available [62] Other Important Information - The company plans to make a significant donation to local wildfire relief efforts, which will increase donation expenses [30] - The company is actively purchasing treasuries to take advantage of favorable rates, with $60 million in ten-year treasury purchases made recently [50] Q&A Session Summary Question: Inquiry about margin stability - Management indicated that they do not foresee major effects on margins and expect them to remain relatively stable [16][17] Question: Capital repatriation and buyback plans - Management stated that buyback decisions will depend on loan growth prospects and stock pricing, with a possibility of continued buybacks if stock remains undervalued [23] Question: Spot rate on deposits - The spot rate on deposits was reported at 3.63% for December [28] Question: Expense run rate expectations - Management projected non-interest expenses at about $23 million for the upcoming year, including increased charitable contributions and elevated payroll taxes [30][31] Question: Loan growth and competitive landscape - Management noted elevated payoff activity and a lack of sustainable increases in loan activity, indicating a cautious outlook for future growth [42][45] Question: Health of borrowers and credit trends - Management reported that borrowers are generally healthy, with strong sponsors willing to support loans during challenging times [66][70]

Financial Data and Key Metrics Changes - The company reported a net income of $6 million for Q4, translating to $0.38 per share, which is an increase from the prior quarter [9] - Net interest income rose by 4% from the previous quarter to $25.2 million, driven by a 10 basis point increase in the net interest margin [9][10] - The total risk-based capital ratio increased to 16.5% and the tangible common equity (TCE) ratio stood at 9.93% [8] Business Line Data and Key Metrics Changes - Loan originations for the quarter totaled $54 million, with outstanding balances at $47 million, showing a diversified mix of commercial and commercial real estate loans [6] - Non-accrual loans and classified loans both declined due to paydowns, with no new issues emerging [5][12] - The average yield on loans increased by 9 basis points during Q4, with expectations for continued improvements in the coming quarters [10] Market Data and Key Metrics Changes - The company experienced a decline in total deposits to $3.2 billion at the end of Q4, attributed to seasonal outflows typical for the quarter [11] - Non-interest bearing deposits remained high at 43% of total deposits, reflecting the strength of the relationship banking model [8] Company Strategy and Development Direction - The company aims to capitalize on improved economic conditions and loan demand, with a strong pipeline of diversified opportunities across markets and industries [14][15] - Investments in technology are expected to enhance efficiency and client service, contributing to revenue growth and profitability [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the financial performance in 2025, citing strong capital and liquidity positions [14] - The company is focused on organic growth while remaining open to opportunistic acquisitions, emphasizing the importance of maintaining a disciplined approach to underwriting and pricing [78][102] Other Important Information - The company declared a cash dividend of $0.25 per share, marking the 79th consecutive quarterly dividend [13] - The transition to a new CFO was highlighted, with management expressing confidence in the continuity of operations [19] Q&A Session Summary Question: Comments on margin and asset repricing opportunities - Management indicated an expected improvement in net interest margin (NIM) due to loan repricing and deposit rate adjustments [28][34] Question: Loan growth pipeline and payoff clarity - The pipeline for Q1 is reported to be 40% higher than the previous year, with expectations for originations to outpace payoffs [36][37] Question: Seasonal dynamics in deposits - Seasonal fluctuations were noted as the primary reason for deposit changes, with proactive efforts to reduce deposit costs showing minimal attrition [81] Question: Capital deployment opportunities - Management discussed various capital deployment strategies, including securities repositioning and potential M&A, while emphasizing a preference for organic growth [86][102]