The Pacific Securities: First coverage of Bank of Chongqing (01963) with a "buy" rating, significant effectiveness in controlling debt costs.

The Pacific Securities released a research report stating that Bank of Chongqing (01963) is steadily increasing its scale driven by its major regional strategy for corporate business. At the same time, effective control of liabilities supports interest rate performance, and asset quality indicators continue to improve. It is expected that the company's operating income for 2025-2027 will be 14.516, 15.515, and 16.677 billion yuan, respectively, with net profit attributable to equity holders of 5.363, 5.747, and 6.214 billion yuan, respectively, and net assets per share of 16.34, 17.89, and 19.35 yuan, respectively, corresponding to PB valuations of 0.40, 0.37, and 0.34 times the closing price on October 10. The first coverage gives a "buy" rating. Key points from Pacific Securities: Event: Bank of Chongqing announces its 2025 interim report. In the first half of 2025, the company achieved revenue of 7.527 billion yuan, a year-on-year increase of 8.24%; achieved a net profit attributable to equity holders of 3.190 billion yuan, a year-on-year increase of 5.39%; the annualized weighted average ROE was 11.52%, a year-on-year decrease of 0.25 percentage points. Strong loan growth benefits from its regional strategy for corporate business The company has benefited significantly from regional strategies such as the "Chengdu-Chongqing Economic Circle," with loan growth maintaining a high speed. In the first half of the year, the company's total loans increased by 13.63% compared to the beginning of the year, with corporate loans performing particularly well, increasing significantly by 20.65% to 377.638 billion yuan compared to the beginning of the year, becoming the core engine driving expansion. Retail loan growth was relatively moderate, increasing by 2.03% compared to the beginning of the year. Loans are closely aligned with regional development strategies, with the company providing nearly 140 billion yuan in credit support to the Chengdu-Chongqing Economic Circle in the first half of the year, with financing balances for the construction of the Western Land-Sea New Corridor exceeding 47 billion yuan. Significant cost control of liabilities and expanding net interest margin against the trend In the first half of 2025, the company's net interest margin increased by 8 basis points year-on-year to 1.35%, driven by a significant 36-basis point decrease in the average cost rate of interest-bearing liabilities to 2.29% year-on-year, exceeding the decline in the average yield of interest-earning assets (28 basis points). In the first half of 2025, the company's net interest spread was 1.39%, a year-on-year decrease of 3 basis points, narrowing the decline. The effect of reducing customer deposit costs was significant, with the average cost rate decreasing by 31 basis points year-on-year to 2.33%, reflecting a significant decrease in both fixed-term and current deposit costs. The company effectively controls the cost of long-term deposits by actively lowering interest rates on special deposit products such as "Happy Savings." Non-interest income under short-term pressure, wealth management business urgently needs transformation Non-interest income has become a drag on performance. In the first half of the year, net fee and commission income decreased significantly by 28.62% year-on-year to 0.365 billion yuan, mainly due to a sharp 59.77% decrease in income from agency wealth management business, reflecting the challenge the company's wealth management business faces against the background of the transformation of wealth management products to net value. Through active business operations in the gold market, the company achieved a net trading and securities investment income of 1.255 billion yuan, a year-on-year increase of 7.63%, partially offsetting the decline in intermediary business. Asset quality stabilizing and improving, continuous progress in risk clearing As of the end of the reporting period, the company's non-performing loan ratio decreased by 8 basis points from the beginning of the year to 1.17%, with both watchlist and overdue loans achieving double-digit declines. The watchlist ratio and overdue ratio were 2.05% and 1.58% respectively, representing decreases of 59 basis points and 15 basis points respectively from the beginning of the year, indicating improving forward-looking indicators for asset quality. In terms of business lines, the non-performing loan ratio for corporate loans decreased by 15 basis points from the beginning of the year to 0.75%, demonstrating significant risk resolution effects; the non-performing loan ratio for retail loans increased by 30 basis points from the beginning of the year to 3.01%, mainly affected by delinquencies in personal business loans (non-performing ratio of 6.23%) and credit cards (non-performing ratio of 4.19%). The company's provision coverage ratio increased by 3.19 percentage points from the beginning of the year to 248.27%, further thickening the safety cushion. Risk warning: Slowing loan growth, continuous narrowing of interest margins, significant deterioration in asset quality.