Investment Rating - The report assigns an "Accumulate" rating for Shanghai Bank, marking its first coverage [1]. Core Views - The report emphasizes the transformation of the credit structure and the resolution of risks, which are expected to solidify the bank's fundamentals. It highlights that the bank's return on equity (ROE) is anticipated to stabilize as the credit structure evolves and risks are systematically addressed [6][9]. Summary by Sections 1. Historical Valuation - Since 2020, Shanghai Bank's valuation has remained at the bottom of the industry due to adjustments in credit structure and profitability challenges. The bank's ROE has been consistently lower than the average of listed city commercial banks, with a 2023 ROE of 10.4%, which is 2.30 percentage points below the average [4][22]. 2. Market Expectations - The report identifies three major changes that could stabilize ROE: 1. A decisive optimization of the credit structure, with significant reductions in consumer loans and corporate real estate loans since 2019 [6]. 2. Gradual resolution of asset quality pressures, with a notable decrease in retail non-performing loan (NPL) rates [6]. 3. Effective management of funding costs, which is expected to stabilize loan pricing [6]. 3. New Valuation Point - The report suggests that with the transformation of the credit structure and the orderly resolution of risks, Shanghai Bank's fundamentals are entering a stabilization phase. The bank's high dividend yield and potential for valuation recovery in the banking sector are highlighted, with an expected 18% upside based on a target price-to-book (PB) ratio of 0.6 for 2025 [6][9]. 4. Investment Analysis Opinion - The report concludes that the bank's fundamentals are stabilizing, supported by low valuation and high dividend yield. It anticipates a net profit growth of 2.1%, 3.5%, and 5.6% for 2025-2027, respectively, and recommends an "Accumulate" rating based on these projections [9][10].