Bank of Ningbo Earnings: NIM Resilience on Recovery in Retail Loan Growth; Shares Fairly Valued

No-moat Bank of Ningbo, or BONB, reported steady year-on-year revenue growth of 7.4% and accelerated net profit growth of 7.0% in the third quarter. The year-to-date net interest margin, or NIM, remained resilient at 1.85%, reflecting a narrower year-on-year contraction of 3 basis points. Given that results were largely in line with expectations, we retain our fair value estimate of CNY 27 per share. The stock is fairly valued at nearly 0.9 times the 2024 book value. As a leading retail bank, BONB is sensitive to the consumer credit cycle. Its above-peer growth potential fueled by strong demand in the Yangtze River Delta and its high ROE should justify a valuation premium. However, we see limited further upside for the stock currently as net profit growth faces credit quality pressures, despite robust loan growth. The stock is currently offering a 2.3% yield on its 16% dividend payout ratio, one of the lowest among large Chinese banks. We do not expect a payout ratio increase in 2024, given the ongoing 15% and 20% year-on-year growth in total assets and loans, which has reduced the year-to-date return on equity by 1.5 percentage points to 14.9%.