Talk every Monday: Comments on the regulatory data of commercial banks in the fourth quarter
Event: on February 11, 2022, the China Banking and Insurance Regulatory Commission announced the main regulatory indicators of 21q4. In 2021, the total asset balance of commercial banks was 281.77 trillion yuan, a year-on-year increase of 8.8%, and the net profit was 2.2 trillion yuan, a year-on-year increase of 12.6%.
With both volume and price rising, the profitability of banks continued to improve. In 2021, commercial banks realized a net profit of 2.2 trillion yuan, with a year-on-year increase of 12.6%. On the one hand, it is due to the impact of the low base in 2020, on the other hand, it is because after commercial banks strengthened the disposal of non-performing assets and consolidated the provision in 19 and 20 years, the quality of bank assets is in a good state, so the provision has the space to release profits. The growth rate of net profit of commercial banks in 21 years increased by 1.1pct compared with the first three quarters, of which the net profit of 21q4 increased by 16.8% year-on-year and 4.6% month on month. The simultaneous rise of volume and price and the improvement of asset quality are the main contributing factors. By bank category:
The net profit of state-owned banks in 2021 increased by 12.7% year-on-year, and the growth rate decreased by 0.9pct compared with the first three quarters of 21 years. Among all bank categories, it is the only one with a decline in net profit growth, mainly because the net profit of state-owned banks in 20q4 increased by 60.2% year-on-year, with good performance.
The net profit of joint-stock banks / urban commercial banks / rural commercial banks in 2021 increased by 13.4% / 11.6% / 9.1% year-on-year, and the growth rate increased by 0.7pct/11.3pct/0.7pct respectively compared with the first three quarters of 21 years. Among them, the growth rate of net profit of joint-stock banks and urban commercial banks reached the highest in the year, while the growth rate of net profit of urban commercial banks fluctuated greatly, which was mainly related to the low base caused by the year-on-year decline of 66.4% in net profit of 20q4 urban commercial banks.
The continuous improvement of liability side costs resulted in a slight increase in net interest margin. In 2021, the net interest margin of commercial banks was 2.08%, an increase of 1bp month on month:
In terms of bank types, the net interest margin of state-owned banks / joint-stock banks / urban commercial banks / rural commercial banks was 2.04% / 2.13% / 1.91% / 2.33% respectively, with a month on month change of + 1bp / – 2bp / + 2bp / + 7bp respectively. Among them, the net interest margin of rural commercial banks increased by 7bps month on month, and the net interest margin of state-owned banks and urban commercial banks also improved. Only the net interest margin of joint-stock banks fell slightly.
According to the published loan interest rate data, the weighted average interest rate of new loans issued in 21q4 was 4.76%, down 24bps from September; The enterprise loan interest rate was 4.57%, down 2bps from September, reaching the lowest level in recent years. Therefore, we believe that the improvement of the bank’s net interest margin is mainly due to the improvement of its liability side cost, such as the early reduction of reserve requirement, the release of low-cost funds, the reform of deposit pricing mechanism, the pressure drop of high interest rate structured deposits and so on.
At the current stage, the policy still focuses on steady growth. The central bank has repeatedly expressed its demand to guide financial institutions to effectively expand loan lending and reduce the financing cost of real enterprises, and LPR has been lowered in January. Based on this, the return on the asset side of banks may be under pressure in 2022. However, from the liability side, banks still benefit from policy dividends, that is, to guide banks to support the development of entities and reduce the burden on enterprises, Regulation continues to guide the decline in the cost of bank liabilities, so there is no need to worry too much about the pressure on the net interest margin of commercial banks.
The marginal easing of policy has promoted the growth of bank scale. In 2021, the total asset scale of commercial banks increased by 8.79% year-on-year, the growth rate increased by 0.5pct compared with 21q3, the loan balance increased by 12.4% year-on-year, and the growth rate increased by 0.2pct compared with 21q3. The growth rate of total assets and loan balance of commercial banks increased month on month. On the one hand, the marginal relaxation of real estate policy since November 21, and on the other hand, the marginal relaxation of monetary policy in the fourth quarter of 21. Considering that since the beginning of the year, the real estate policy and monetary policy have been further relaxed, and the issuance of special bonds of local governments has been accelerated, the bank expansion in 22 years is expected to be accelerated.
Improved asset quality and adequate provision coverage:
By 2021, the non-performing loan ratio of commercial banks was 1.73%, down 2bp month on month, and the proportion of concerned loans was 2.31%, down 2bps month on month. After increasing the recognition and disposal of non-performing loans in recent years, the non-performing burden of banks has been reduced and the quality of assets has been further improved. In terms of branches, the non-performing loan ratios of state-owned banks / joint-stock banks / urban commercial banks / rural commercial banks were 1.37% / 1.37% / 1.9% / 3.63% respectively, with month on month changes of – 6bps / – 3bps / + 8bp / + 4bp respectively. Compared with state-owned banks and joint-stock banks, urban and rural commercial banks have greater asset pressure, indicating that there is pressure on the asset quality of small and medium-sized banks.
By 2021, the provision coverage of commercial banks was 196.9%, down 0.1pct month on month. The provision coverage of Chinese banks / joint-stock banks / urban commercial banks / rural commercial banks were 239.2% / 206.3% / 188.7% / 129.5% respectively, with a month on month change of + 6.7pct / – 0.4pct / – 8.5pct / – 2.3pct respectively. Only the provision coverage of state-owned banks increased month on month, and the risk offset of other banks decreased.
We expect that the non-performing assets of commercial banks will be controllable and the asset quality will continue to show an improvement trend in the future. On the one hand, the disposal of non-performing assets in the past few years has been relatively sufficient, and the quality of bank assets is relatively clean compared with history. On the other hand, because of the marginal easing of real estate regulation policy and monetary marginal easing, the probability of large-scale risk is reduced.
Investment strategy: on the whole, the regulatory data of commercial banks in 2021 are excellent. Combined with the January social finance data released this week, social finance generally exceeded expectations, and the medium and long-term loans of the enterprise sector increased year-on-year, and the wide currency is gradually transmitting to the wide credit. We expect that the follow-up “wide currency + wide credit” policy will continue, which will help to improve the overall credit environment, and the pessimistic expectation of the market for the quality of bank assets will be gradually revised. It is suggested to pay attention to banks with excellent fundamentals and annual reports exceeding expectations, such as: Postal Savings Bank Of China Co.Ltd(601658) , China Merchants Bank Co.Ltd(600036) , Ping An Bank Co.Ltd(000001) , Bank Of Ningbo Co.Ltd(002142) , Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) , etc.
Risk warning: policy risk; The risk of macroeconomic recovery falling short of expectations; The global covid-19 epidemic continues to deteriorate.
