Bank of Hangzhou (600926): Small and micro-finances have advantages in terms of location

Bank of Hangzhou (600926): Small and micro-finances have advantages in terms of location

Investment Highlights: After the Bank of Hangzhou’s 17- and 18-year adjustments to its asset structure, the interest rate level has improved. We expect to continue to benefit from the improvement of interbank costs in 19 years and are optimistic about the company’s future ROE improvement.

Covered for the first time, giving the expected market rating.

Small and micro finance specialization, copyright location advantages.

Hangzhou Bank ‘s small and micro finance line ‘s four major products in 2Q18 accounted for 60%, with the increase mainly based on collateral and small amount dispersion, which effectively controlled credit risk.

The company is based in Hangzhou. After years of expansion, the physical outlets have extended to the Yangtze River Delta and North to Shanghai and Shenzhen.

The proportion of loans to Hangzhou at the end of the second quarter of 2018 was 47.

6%, loans in other regions of Zhejiang Province accounted for 22%.

0%, accounting for 69 in total.

7%.

We believe that Hangzhou Bank is based on Zhejiang, where the private economy is active, and has a strong customer base in the region. Benefiting from the talents and industrial advantages of Hangzhou and Zhejiang, Xiaowei Finance has a complete franchise system and loan growth will continue to grow steadily.

The optimization of the asset structure has driven the expansion of interest margins.

The Bank of Hangzhou has gradually increased the proportion of deposit loans in 2017 and 2018, increasing by 7 from its low point division.

2, 6.

1 unit.

The loan interest rate and proportion increased simultaneously to the first half of 2018. The asset-side rate of return increased by 31BP compared with 2017, driving the interest margin to increase by 7BP.

The inter-bank deposit certificate term of the company is relatively higher than that of the inter-bank. The decrease in inter-bank costs will be further reflected in 2019.

We estimate that the proportion of such high-cost interbank certificates of deposit of Hangzhou Bank at the end of 2018 was 39.

2%, the sequel of the deposit certificate due will be included in the 2019 interbank deposit certificate cost rate decreased by 42BP, interest bearing resistance cost rate decreased by 7BP.

The quality of retail assets is excellent, and small and micro improvements to the company can be expected.

Hangzhou Bank’s retail financial line assets have excellent asset quality, mortgages in 2Q18, and the NPL ratio of consumer loans is only 0.

04%, 0.

07%; the non-performing loan ratio of self-employed loans has fallen rapidly since 2017, and we estimate that it will be close to 3% in 2Q18; the credit risk to public credit will gradually ease, and 4Q18 is expected to have improved.

According to the 2018 Annual Results Express, the Bank of Hangzhou’s data at the end of 2018 has clearly improved: the non-performing rate at the end of 2018 was 1 in 2017.

59% return 1.

45%, bad deviation from 119% from 74% in 2017, provision coverage ratio increased from 211% in 2017 to 256%.

Investment Advice.

After the Bank of Hangzhou’s 17- and 18-year adjustments to its asset structure, the interest margin level has improved. We expect that in 19 years, it will continue to benefit from the improvement of interbank costs and is optimistic about the company’s future ROE improvement.

We predict that the company’s net profit growth attributable to mothers will be 18 in 2019-2020.

2%, 15.

2%, EPS 淡水桑拿网 is 1.

15.1.

34 yuan.

According to the DDM, the final reasonable value range of Hangzhou Bank obtained by the relative estimation method is 10.

14-10.

80 yuan, corresponding to 2019 PB estimate is 1.

00-1.

07 times, 2019 PE is estimated to be 8.

8-9.4 times, giving the expected market rating.

Risk warning: the company’s ability to repay its debts has declined, and the quality of its assets has deteriorated severely; major changes have occurred in financial regulatory policies.

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