常熟银行(601128)：万事俱备 只待东风

Core Viewpoint - Changshu Bank achieved double-digit growth in both revenue and profit in Q1 2025, despite a slight slowdown in scale growth due to weak credit demand. The recovery of the economy is expected to improve demand from small and micro enterprises, providing significant room for credit expansion. Although the net interest margin continues to narrow under asset-side pressure, the ongoing optimization of deposit costs is expected to support the margin. The bank is projected to maintain high single-digit revenue growth and double-digit profit release in 2025. The current low dividend rate has suppressed the bank's valuation, which does not align with its strong fundamentals, indicating substantial potential for valuation recovery if the dividend rate improves in the future [1][10][11]. Financial Performance - In Q1 2025, Changshu Bank reported operating revenue of 2.971 billion yuan, a year-on-year increase of 10%, and a net profit attributable to shareholders of 1.084 billion yuan, up 13.9% year-on-year. The non-performing loan ratio was 0.76%, down 1 basis point quarter-on-quarter, while the provision coverage ratio decreased by 11 percentage points to 489.6% [2][3][9]. Revenue Composition - The bank's net interest income grew by 0.9% year-on-year, reflecting stable growth despite weak credit demand, particularly in small and micro loans. Non-interest income surged by 495.2%, driven by significant growth in fees from insurance and precious metals. Other non-interest income increased by 48.8%, supported by a rise in foreign exchange gains [3][4][5]. Credit Demand and Loan Growth - Credit demand remains weak, leading to a slowdown in loan growth. In Q1 2025, the loan scale increased by 6.1% year-on-year, with corporate loans growing by 7.3% and retail loans by only 0.2%. The bank's strategy of focusing on small and scattered loans has allowed it to maintain a stable loan portfolio despite the challenging environment [5][6][8]. Deposit and Funding Strategy - Changshu Bank's deposits grew by 9% year-on-year, with a notable increase in demand deposits and a reduction in high-cost savings. The bank's proactive management of deposit structure has improved the cost of funding, which is expected to support the net interest margin [7][8]. Asset Quality and Risk Management - The bank's non-performing loan ratio remains low, and it has effectively managed retail asset quality through rigorous risk control and increased write-offs. The non-performing loan ratio is expected to remain stable, allowing for a gradual release of provisions to support profit growth [9][10]. Valuation and Investment Outlook - Despite strong fundamentals, Changshu Bank's current valuation is significantly undervalued at 0.68 times the 2025 PB ratio. The low dividend yield has constrained its valuation, but there is substantial potential for recovery if the dividend rate improves. The bank is expected to maintain high single-digit revenue growth and double-digit profit growth in the coming years [10][11].