Investment Rating - The investment rating for the company is maintained at "Neutral" [5][3]. Core Views - The company's overall performance meets expectations, with a narrowing decline in revenue and profit. The forecast for net profit from 2025 to 2027 is projected at 421/425/430 million yuan, with year-on-year growth rates of -5.5%/1.1%/1.2% [3][4]. - The annualized weighted average ROE for the first half of 2025 is 10.7%, a decrease of 1.1 percentage points year-on-year [1]. - The company's total assets grew by 2.1% year-on-year to 5.87 trillion yuan, with retail AUM increasing by 0.4% year-to-date [1][2]. Financial Performance Summary - Revenue for the first half of 2025 was 69.4 billion yuan, a year-on-year decline of 10.0%, which is a 3.0 percentage point improvement compared to the first quarter [1]. - Net profit attributable to shareholders for the same period was 24.9 billion yuan, down 3.9% year-on-year, with a 1.7 percentage point improvement from the first quarter [1]. - The average net interest margin for the first half of 2025 was 1.80%, a decrease of 16 basis points year-on-year, primarily due to falling market interest rates and loan structure adjustments [2]. - Non-interest income decreased by 2.0% year-on-year, mainly due to a decline in management fee income from wealth management products [2]. Asset Quality Summary - The non-performing loan generation rate for the first half of 2025 was 2.21%, a slight decrease of 0.01 percentage points year-on-year, indicating stable asset quality [2]. - The non-performing loan ratio at the end of the second quarter was 1.05%, down 0.01 percentage points from the beginning of the year [2]. - The coverage ratio for provisions was 238% at the end of the second quarter, a decrease of 13 percentage points from the beginning of the year [2].

Core Viewpoint - The banking sector is expected to see a marginal increase in revenue and profit growth in Q2 compared to Q1, with a continuation of the annual trend. The net interest income is projected to decline by 0.7% year-on-year in the first half of the year, while total revenue is expected to decrease by 1.6% year-on-year [1] Revenue and Profit Analysis - Net interest income is forecasted to decline by 0.7% year-on-year in the first half of the year, which is an improvement compared to a 3.4% decline in the same period last year. The narrowing of the interest margin decline is a key support factor, along with an increased proportion of deposit re-pricing [1] - The year-on-year growth rate of social financing is expected to recover to 8.9% by mid-year, providing support for the recovery of net interest income growth in Q2 [1] - The industry’s net interest margin is expected to decline slightly by 3-4 basis points in Q2, primarily due to the impact of LPR cuts in 2024, but is anticipated to stabilize and slightly recover in the second half of the year [1] Non-Interest Income - Fee income is expected to recover, with the growth rate projected to stabilize around 0% year-on-year in the first half of 2025. The pressure on fee income is expected to ease after the completion of fee rate adjustments [2] - Other non-interest income pressures are expected to decrease, as bond market interest rates have fallen to last year's low levels, allowing for recovery from previous losses [2] Asset Quality - The asset quality trend is expected to remain stable, with improvements in corporate loans and manageable risks in retail loans due to their small and dispersed nature. The overall non-performing loan ratio is expected to align with the trends in corporate loans, showing a stable improvement [3] Overall Industry Outlook - The revenue is projected to decline by 1.6% year-on-year, with a narrowing decline compared to the same period in 2024. The pressure on traditional interest margin businesses is expected to be less than in 2024, with a significant reduction in the decline of net interest margins due to lower funding costs [4] - The overall asset quality is expected to remain stable, with strong profit release capabilities from provisions, indicating that industry profits are likely to maintain positive growth [4]