Core view:
Event by the end of January 2022, the bank index had risen by 2.47% and 10.09% relative to the excess return of CSI 300, ranking first among 30 CITIC first-class industries. We believe that the leading performance of the banking sector is mainly due to the impact of the higher than expected performance of the 2021 annual report and the increase of market risk aversion. The subsequent spring market is expected to continue. The investment opportunities in the first quarter come from the following five aspects:
The fundamentals are sound and worry free, and the performance of listed banks in 2021 continues to shine. According to incomplete statistics, in 2021, 19 listed banks achieved a total operating revenue of 1.31 trillion yuan, a year-on-year increase of 10.88%, higher than the growth rate of the third quarterly report, and realized a net profit attributable to the parent of 413.111 billion yuan, a year-on-year increase of 21.51%, continuing a double-digit high growth: roe was 11.67%, a year-on-year increase of 0.75%. At the same time, the asset quality was further optimized and the provision coverage remained at a high level. By the end of 2021, the average non-performing rate of 19 listed banks was 1.11%, a year-on-year decrease of 0.17 percentage points; The provision coverage rate was 337.97%, an increase of 48.11 percentage points year-on-year. Taking into account multiple factors such as the widening of the policy environment, the gradual clearing of non-performing risks and the full provision, the bank’s fundamentals are expected to remain stable and the risk is controllable.
The pattern of broad credit has been gradually established, which is conducive to the recovery of the banking industry, the reduction of reserve requirements and interest rates have been successively implemented, the quota of special bonds was issued in advance in the first quarter, and the issuance of government bonds was accelerated, which is conducive to stimulating infrastructure investment and the demand for medium and long-term loans of enterprises, and accelerating the formation of the pattern of broad credit. By the end of December 2021, the stock of social finance had increased by 10.29% year-on-year, and continued to improve for three consecutive months; In a single month, social finance increased by 649 billion yuan year-on-year, with a growth rate of 37.75%, second only to the level in February 2021. Among them, government debt is the core driving factor. In December 2021, the monthly government debt financing exceeded trillion yuan, and the cumulative financing in the fourth quarter was 2.6 trillion yuan, continuing the quarterly improvement trend and reaching a new high in the whole year. In addition, the special debt of 1.46 trillion yuan in the first quarter of 2022 was issued at the end of 2021, and the issuance of local government bonds increased to 698.857 billion yuan in January. The improvement of credit environment is a high probability event, which is conducive to the recovery of the banking industry.
There is still room for the policy in the short term, which helps to cope with the pressure of overseas interest rate hikes and continue to underpin the macro economy. In view of the Fed’s interest rate hike expectation in March, the current stage is an important window period for the policy to advance. The press conference on financial statistics pointed out that we should expand the monetary policy toolbox, maintain the stability of the total amount and avoid credit collapse, and actively “add” structural monetary policy tools. At the same time, we are required to move forward and stay ahead of the market curve. We believe that the policies related to short-term stable growth will still be overweight to deal with the impact of overseas interest rate hikes on the current policy effect and macro-economy.
The marginal improvement of real estate policies promotes the resolution of risks, weakens the impact on the quality of bank assets, and corrects the deviation in the implementation of real estate policies. The December Political Bureau meeting and the central economic work meeting emphasized the promotion of affordable housing construction, support the commercial housing market to better meet the reasonable housing needs of buyers, and promote the healthy development and virtuous cycle of the real estate industry, It will help promote the orderly resolution of credit risks of real estate enterprises and alleviate the pressure on the quality of bank assets.
The current valuation has a good margin of safety, with both defense and rebound attack and defense. As of the end of January 2022, the Pb of the banking sector was 0.64x, which is 2.9% since 2016. At the same time, it is at the bottom of 30 primary industries of CITIC, with a high margin of safety. 2021q4 heavy position data of public funds show that the proportion of low allocation of institutions to the banking sector continues to narrow, urban commercial banks turn to over allocation, and the proportion of positions increases significantly, indicating that the allocation value of the banking sector is increasing, especially the high-quality urban commercial banks with obvious geographical advantages.
Investment suggestions: we will continue to pay attention to the promotion of broad credit on the improvement of the bank’s business environment, steady growth of performance and optimization of asset quality, be optimistic about the opportunity to repair the low valuation of bank shares in the first quarter, and maintain the “recommended” rating. In terms of individual stocks, two main lines are followed: (1) high quality urban and rural commercial banks with obvious regional economic advantages, strong growth momentum at the asset end and leading asset quality in the industry are recommended Bank Of Nanjing Co.Ltd(601009) (601009), Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) (601128) and Bank Of Hangzhou Co.Ltd(600926) (600926); (2) For individual stocks with high contribution to medium income, leading wealth management business and expected medium and long-term premium but short-term correction, it is recommended to China Merchants Bank Co.Ltd(600036) (600036), Ping An Bank Co.Ltd(000001) (00000 1).
The risk indicates that the macroeconomic growth is lower than expected, resulting in the risk of deterioration of asset quality.
