Bank of Nanjing (BONJ) recently announced its preliminary 2024 results, indicating decent earnings growth and solid assets quality in 4Q24. According to the preliminary results, BONJ’s attributable net profit grew 9.2% YoY in 4Q24, after increasing 10.2% YoY in 3Q24. We noted that its attributable net profit grew 9.1% YoY in 2024, higher than 0.5% YoY growth in 2023. It maintains an excellent assets quality as its NPL is at the low-end level among peers. Its NPL ratio reached 0.83% in 2024, against 0.83% in 9M24 and 0.9% in 2023. As of end-2024, its loans/deposits increased 14.3%/9.3% from end-2023. BONJ is now trading at 0.72x 2024E P/B, which, in our view, is undervalued. Maintain BUY rating.

Key Factors for Rating

BONJ maintained excellent assets quality in 4Q24. We noted that its NPL ratio was 0.83% at end-December 2024, unchanged from 0.83% at end- September 2024, lower than 0.9% at end-December 2023, still at the low-end level among peers. Meanwhile, its allowance to NPLs reached 335.27% at end- September 2024, down from 340.40% at end-September 2024 and 360.58% at end-December 2023.

Operating income grew significantly in 4Q24. Its operating income increased 11.3% YoY in 2024, higher than 1.2% YoY increase in 2023. We noted that its operating income grew 23.6% in 4Q24, higher than the growth of 8.4% YoY in 3Q24. Its operating income growth may continue to increase in 2025, as top policymakers will continue to unveil more easing monetary and proactive fiscal policies as well as property and stock market policies.

NIM will remain stable in 4Q24. BONJ’s NIM was 1.96% in 1H24, against 2.04% in 2023 and 2.19% in 2022. We expect its NIM to reach 1.95% in 2024. As China’s banks are likely to lower deposit rates to further support the real economy, BONJ’s NIM may decline at a slower pace in 2025. We expect its NIM to drop 3bps in 2025.

Valuation

We expect its ROAE to reach 13.1% in 2024. In our view, given its solid fundamentals, BONJ should trade at high-end valuation among its joint-stock bank and city commercial bank peers. We raised our target price from RMB13.09 to RMB14.03, based on 0.95x 2024E P/B. Maintain BUY rating.