Steady performance in 3Q22 and 2022E
　　Shareholders’ net profit of PSBC rose by 14.48% yoy in 3Q22. NIM was 2.23% in 3Q22, compared with 2.27% in 1H22 （or 2.37% in 3Q21）， consistent with the policy of reducing real financing cost of enterprises and LPR cuts. As of end-3Q22, the aggregate NPL ratio was 0.83%, equal to the 0.83% at end-1H22, and the allowance to NPL ratio was kept at around ~404%, vs. ~409% at end-1H22. The net fee and commission income maintained fast growth, up by 40.3% yoy in 3Q22. The Company’s overall business performance in 3Q22 was stable, although NIM might be under pressure in next few quarters. Some banks （such as Industrial Bank, CITIC Bank, and Ping An Bank） posted their preliminary 2022 results. In general, they achieved steady asset quality and profit growth in the 4Q22 （Fig. 2）。
　　We expect resilient results for PSBC in 4Q22.
　　Positive outlook for PSBC and the sector
　　In December, the Politburo meeting emphasized that "stability is the top priority and progress should be made in stability", and urged to do a good job in "stabilizing growth, stabilizing employment, and stabilizing prices".
　　As households saving rate rose significantly in 2022, much higher than the median level during 2013 and 2019, strong willingness to spend has its solid foothold. Meanwhile, accommodative policies on property, infrastructure and manufacturing should underpin business cycle to normalize. The potentially stabilized economic conditions might continue to support the re-rating of the banking sector in long term view. PSBC （Fig. 3 and Fig. 9） has strong focus on retail banking and mortgage loans, meaning it might benefit more from aforementioned policies compared with some other mega banks.
　　Maintain BUY
　　PSBC is trading at ~5.3x 23E P/E, or 0.63x 23E PB. Maintain BUY for PSBC on its resilient 3Q22 performance and its positive outlook. PSBC proposed non-public issuance of A shares, which shall not exceed RMB45 billion, and will be fully used to replenish the core tier 1 capital of the Bank.
　　The Company’s EPS might be slightly diluted by ~5% after the issuance.
　　Maintain TP at HKD6.50, equal to ~0.83x 23E P/B （~15% premium to its past 5-yr average P/B）。 Key catalysts: better-than-expected asset quality, NIM expansion; key downside risks: worse-than-expected asset quality, NIM pressure.