Pacific Securities has released a research report stating that Bank of Chongqing (01963) is leveraging major regional development strategies to drive steady growth in corporate banking business scale, while effective debt cost management supports net interest margin performance and asset quality indicators continue to improve. The firm projects the company's operating revenue for 2025-2027 to be 14.516 billion, 15.515 billion, and 16.677 billion yuan respectively, with net profit attributable to shareholders of 5.363 billion, 5.747 billion, and 6.214 billion yuan. Net assets per share are expected to reach 16.34, 17.89, and 19.35 yuan, corresponding to PB valuations of 0.40x, 0.37x, and 0.34x based on the closing price on October 10th. The firm initiates coverage with a "Buy" rating.
Pacific Securities' main viewpoints are as follows:
**Event: Bank of Chongqing Released 2025 Interim Report**
In the first half of 2025, the company achieved operating revenue of 7.527 billion yuan, up 8.24% year-over-year, and net profit attributable to shareholders of 3.19 billion yuan, up 5.39% year-over-year. The annualized weighted average ROE was 11.52%, down 0.25 percentage points year-over-year.
**Strong Loan Growth with Corporate Business Deeply Benefiting from Regional Strategy**
The company has deeply benefited from regional strategies such as the "Chengdu-Chongqing Economic Circle" and maintained high-speed growth in loan deployment. In the first half, the company's total loans increased 13.63% from the beginning of the year, with corporate loans showing particularly outstanding performance, surging 20.65% to 377.638 billion yuan, becoming the core engine driving scale expansion. Retail loan growth was relatively moderate, increasing 2.03% from the beginning of the year.
Loan deployment is closely aligned with regional development strategies. In the first half, the company provided nearly 140 billion yuan in credit support to the Chengdu-Chongqing Economic Circle and maintained financing balances exceeding 47 billion yuan for serving the construction of the New International Land-Sea Trade Corridor.
**Significant Debt Cost Management Results with Net Interest Margin Expanding Against the Trend**
In the first half of 2025, the company's net interest margin increased 8 basis points year-over-year to 1.35%. The core driver was the significant 36 basis point year-over-year decrease in the average cost rate of interest-bearing liabilities to 2.29%, with the decline exceeding that of interest-earning assets' average yield (28 basis points). The company's net interest spread for the first half of 2025 was 1.39%, down 3 basis points year-over-year, with a narrowing decline.
Customer deposit cost reduction effects were significant, with the average cost rate declining 31 basis points year-over-year to 2.33%. Both time deposits and demand deposits showed notable cost reductions. The company effectively controlled long-term deposit costs by proactively lowering rates on signature time deposit products like "Happiness Deposits."
**Non-Interest Income Under Short-term Pressure with Wealth Management Business Requiring Transformation**
Non-interest income became a drag on performance. Fee and commission income fell significantly by 28.62% year-over-year to 365 million yuan in the first half, mainly due to a sharp 59.77% decline in agency wealth management business income, reflecting challenges faced by the company's wealth management business amid the net asset value transformation of wealth management products.
The company achieved 1.255 billion yuan in net trading and securities investment gains through active precious metals business operations, up 7.63% year-over-year, partially offsetting the decline in fee income business.
**Asset Quality Stable with Continued Risk Resolution Progress**
As of the reporting period end, the company's non-performing loan ratio decreased 8 basis points from the beginning of the year to 1.17%. Both special mention and overdue loan ratios achieved "double declines," with special mention and overdue rates at 2.05% and 1.58% respectively, down 59 and 15 basis points from the beginning of the year. Forward-looking asset quality indicators improved.
By business segment, corporate loan NPL ratio decreased 15 basis points from the beginning of the year to 0.75%, showing significant risk resolution results. Retail loan NPL ratio increased 30 basis points from the beginning of the year to 3.01%, primarily dragged down by personal business loans (6.23% NPL ratio) and credit cards (4.19% NPL ratio).
The company's provision coverage ratio increased 3.19 percentage points from the beginning of the year to 248.27%, further strengthening the safety buffer.
**Risk Warning:** Slower loan deployment growth, continued net interest margin compression, significant asset quality deterioration
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