2022-01-06 Bank of China International Securities Co., Ltd. Lin Yuanyuan and Lin Yingying conducted research on Wuxi Bank and issued a research report "rooted in Wuxi, steady growth". This report gives an overweight rating to Wuxi Bank, with a current share price of 5.75 yuan.

Wuxi Bank (600908)
Wuxi Bank is rooted in Wuxi, with outstanding advantages in local customer base and network, and can share the rapid growth of local high-tech industries, rapid economic development and the accumulation of residents' wealth dividends. There is also potential for expansion in other regions of Jiangsu. Scale, income and profits are expected to continue to grow rapidly. The risk preference of the company is low, the risk control is prudent, the asset quality or continuous performance is better, and the future profit stability may also be better. We believe that the company synchronized with the overall valuation of agricultural banks to repair at the same time, the relative valuation may be improved.
Wuxi has a strong economic advantage. Wuxi is economically developed, and the total amount of GDP ranks third in Jiangsu Province, only lower than Suzhou and Nanjing. The industrial structure is constantly upgrading, and high-tech industries such as the Internet of things, integrated circuits and biomedicine have leading advantages. Finance and real estate are relatively stable, and residents' income and wealth are relatively high.
The company is rooted in Wuxi and has a good customer base in Wuxi. The company's outlets and business are mainly concentrated in Wuxi, with the number of local outlets in the forefront of the industry, with loans in Wuxi accounting for 77% and a market share of about 5% in Wuxi. The company has an absolute advantage in Wuxi citizen card business, with nearly 5.1 million citizen cards, and has a high coverage of retail customers in this area. The top 10 shareholders of the company are mainly local state-owned enterprises and private enterprises, and the management is also mainly engaged in the training and growth of the industry.
Prudent risk control and excellent asset quality. The defective rate and overdue proportion are at a relatively low level in the comparable industry, while the bad + concern is at the lowest level in the comparable industry. The company's good asset quality does not rely on write-off, plus write-off its bad proportion is also the best in the industry, excellent risk control is long-term sustainable, bad freshmen are at the lowest level of comparable industry, adequate provisions, low credit cost is sustainable.
Net asset profitability and asset profitability are moderately higher than those of the same industry. The company has relatively outstanding advantages over the same industry in terms of cost control, fee income, asset quality, provision and so on, and the interest margin is relatively low. The weak interest rate spread is mainly due to the low loan yield, in which the main public loans account for a relatively high proportion, the retail mortgage accounts for a relatively high proportion, the deposit interest payment rate is on the high side, and the proportion of time deposits is high. The spread reflects the fierce competition in the banking industry in Wuxi, combined with lower bad and credit costs, the spread may also result from the company's low risk preference.
Valuation
We believe that the scale growth of the company inside and outside Wuxi area is sustainable, and there is room for both public and retail; the marginal pressure of interest margin policy is gradually alleviated; retail business or fees continue to grow rapidly; with the transmission of economic pressure, adverse generation may rise, comparative advantage may still exist, and credit cost may still be low. It is expected that the company's profits can maintain rapid growth.
Based on our forecast, Wuxi Bank PB0.78X in 2021, PB0.69X in 2022, overweight rating for the first time.
Risk hints: the economy has fallen sharply more than expected; Wuxi's local economy or core industries have been hit by the downside more than expected.

A total of eight agencies have rated the stock in the last 90 days, including six buy ratings and two overweight ratings; the average institutional target price in the past 90 days is 7.71; according to the Securities Star valuation analysis tool, Wuxi Bank (600908) has a good company rating of 2.5 stars, a good price rating of 4 stars and a comprehensive valuation rating of 3.5 stars. (rating range: 1-5 stars, up to 5 stars)