常熟银行 (601128.SH): Changshu Rural Commercial Bank - A: Model Update

We update our model to incorporate revised 3Q26 forecasts. We now expect 7% y/y revenue growth and 10% y/y profit growth in 3Q. As a result, we also slightly revise 2026E net profit by -0.1% while keeping 2027-28 estimates unchanged. In terms of valuation, we slightly revise down our normalized ROE assumption from 9.2% to 9.1% after we factor in higher normalized credit cost forecasts, as the bank is more exposed to SME-related risks now. We lower our Dec-27 PT by 1.8%, to Rmb5.50, based on DDM assuming a cost of equity of 14.40%, a normalized ROE of 9.1% and a terminal date of 31 December 2028. We maintain our Underweight rating. CSRCB has developed its own small business loan model to capture the niche individual business loan market, allowing it to avoid direct competition with larger banks in the local area, which has helped it achieve the highest retail loan yield among the CRBs we cover with relatively stable asset quality;