Event: on February 11, the China Banking and Insurance Regulatory Commission announced the data of major regulatory indicators of the banking and insurance industry in the fourth quarter. Our comments are as follows:
The growth rate of net profit of the whole industry continued to rise, urban commercial banks improved significantly, and state-owned banks fell month on month. In 2021, commercial banks realized a net profit of 2.18 trillion yuan, a year-on-year increase of 12.63%, and the growth rate was 1.18 PCT higher than that of 3q21. Among them, state-owned banks increased by 12.7% year-on-year, with a growth rate of 0.94pct lower than 3q21; The net profits of joint-stock banks, urban commercial banks and rural commercial banks increased by 13.37%, 11.56% and 9.06% year-on-year, with growth rates of 0.67pct, 11.19pct and 0.67pct respectively compared with 3q21. From the published performance express of listed banks in 2021, the net profit growth of listed urban commercial banks and rural commercial banks is higher than the industry average. For example, Bank Of Jiangsu Co.Ltd(600919) (YoY + 30.7%), Bank Of Ningbo Co.Ltd(002142) (YoY + 29.7%), Jiangsu Zhangjiagang Rural Commercial Bank Co.Ltd(002839) (YoY + 29.8%), Jiangsu Suzhou Rural Commercial Bank Co.Ltd(603323) (YoY + 20.7%), Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) (YoY + 21.1%). It reflects that at present, the performance differentiation of small and medium-sized banks continues to increase, the economic growth momentum of the Yangtze River Delta, Chengdu Chongqing economic circle and other regions is more sufficient, and the operating environment of regional institutions has strong advantages and higher growth.
The overall scale growth rate increased month on month, and the internal performance of the sector was differentiated. At the end of 2021, the total assets of commercial banks increased by 8.58% year-on-year, and the growth rate increased by 0.25 PCT month on month; Among them, the year-on-year growth rates of total assets of state-owned banks, joint-stock banks, urban commercial banks and rural commercial banks were 7.76%, 7.53%, 9.74% and 10.02% respectively. Only the growth rate of state-owned banks improved month on month. It reflects that under the overweight of the steady growth policy in the fourth quarter of last year, the state-owned banks have strengthened the implementation and accelerated the credit supply. The credit supply of joint-stock banks and regional urban and rural commercial banks is relatively weak. It is expected that with the sustained development of the steady growth policy and the setting tone of the central bank guiding financial institutions to vigorously expand loan lending, the credit relief efforts will be increased in 2022.
The net interest margin of commercial banks stabilized, and large banks and urban rural commercial banks performed better. In 2021, the net interest margin of commercial banks was 2.08%, up 1bp month on month. On the one hand, benefiting from the optimization of asset side structure, the proportion of high-yield retail loans such as credit, especially mortgage loans and personal consumption loans has increased. The structural optimization helps to stabilize the overall asset side yield. On the other hand, the dividends of the early deposit interest rate pricing reform were gradually released, leading to a decline in the cost of deposits and a slow release of the pressure on the cost of bank liabilities. In terms of breakdown, the net interest margin of state-owned banks, urban commercial banks and rural commercial banks increased by 1bp, 2bp and 7bp to 2.04%, 1.91% and 2.33% respectively month on month, and the net interest margin of joint-stock banks decreased by 2bp to 2.13% month on month.
The central bank’s monetary policy implementation report shows that the weighted average interest rate of new corporate loans in December has fallen to a record low of 4.57%. In the future, due to the impact of continuous interest rate cuts, there is downward pressure on loan pricing, but asset structure adjustment is expected to alleviate the downward pressure on asset side yield. On the liability side, thanks to the dividend of deposit interest rate pricing reform and abundant liquidity, the downward debt cost of commercial banks will also form a hedge, and the net interest margin is generally controllable.
The overall asset quality continued to improve, and the asset quality of some small and medium-sized banks was under pressure. At the end of 2021, the non-performing loan ratio of commercial banks was 1.73%, down 2bp month on month; Concerned loans accounted for 2.31%, down 2bp month on month. The improvement of asset quality of commercial banks benefits from the strong disposal of non-performing assets and the reduction of non-performing assets. In 2021, the disposal of non-performing assets by the banking industry was 3.13 trillion, an increase of 0.11 trillion year-on-year. In terms of breakdown, the asset quality is differentiated, and the asset quality of small and medium-sized banks is under pressure. Among them, the non-performing rate of large state-owned banks and joint-stock banks decreased by 6BP and 3bp to 1.37% and 1.37% month on month; The non-performing rate of urban commercial banks and rural commercial banks increased by 8bp and 4bp to 1.90% and 3.63% month on month. However, from the situation of listed urban rural commercial banks, the non-performing rate remains at a low level.
Investment strategy: from the perspective of regulatory data and published performance express, the profit growth rate of commercial banks continued to improve steadily in 2021, the net interest margin rebounded month on month, and the overall asset quality improved. In the future, it is expected that under the setting tone of the steady growth policy and the central bank’s guidance to financial institutions to effectively expand loan lending, credit lending is expected to accelerate. The optimization of asset structure and the decline of debt cost are expected to hedge the downward pressure on asset side yield caused by some interest rate cuts, and the net interest margin is expected to be generally controllable. In addition, with the correction of real estate regulation policies, the potential adverse pressure in the real estate field is expected to be gradually released. It is expected that the fundamentals of subsequent industries will remain stable.
At this stage, the valuation of the banking sector and the proportion of institutional positions are still relatively low, with the power and space for repair. It is recommended to select high-quality regional banks such as Jiangsu, Zhejiang and Chengdu Chongqing (including Bank Of Ningbo Co.Ltd(002142) , Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) ), as well as retail banks with first mover advantages in the field of wealth management (including China Merchants Bank Co.Ltd(600036) , Ping An Bank Co.Ltd(000001) ).
Risk tip: the economic stall and downturn lead to the deterioration of asset quality; Unexpected changes in regulatory policies, etc.
