Key investment points
Data analysis of banking industry in 2021. 1. The non-performing rate of the industry decreased by 2bp month on month, and the non-performing margin of the state-owned stock bank improved significantly, realizing the double decline of non-performing. The non-performing rate of China’s state-owned banks decreased significantly by 6BP month on month to 2019 level, and the non-performing rate of joint-stock banks decreased by 3bp to the best level since June 2015. The non-performing rate of urban commercial banks and rural commercial banks has increased month on month, and the differentiation between regions is expected to further increase. In the case of higher write off scale in a single quarter, the single quarter annualized NPL net generation rate calculated by the whole banking industry in the fourth quarter increased slightly month on month, and remained low overall. The cumulative annualized NPL net generation in the whole year was 0.80%. 2. The industry net interest margin has continued to pick up since the second quarter, and the marginal improvement of rural commercial banks is the largest. In the fourth quarter, the net interest margin of the industry was 2.08%, up 1bp month on month, of which the interest margin of ABC increased 7bp month on month to 2.33%. The interest rate spreads of urban commercial banks and state-owned banks have also improved marginally, while the interest rate spreads of joint-stock banks and private banks are under certain pressure. It is expected that in 2022, the industrial interest margin will still be under pressure, but the downward range is limited: the liabilities will contribute positively, the asset side will still have downward pressure under the downward pressure of LPR and profit giving entities, and individual banks will stabilize the interest margin by adjusting the asset structure and making efforts to retail. 3. The net profit of the industry increased by 12.6% year-on-year, the highest growth rate in the year and the highest since the end of 2014. On the one hand, there was the impact of last year’s low base. On the other hand, the bank’s operating environment also improved marginally in the fourth quarter, and the volume and price of the industry rose simultaneously. At the same time, the excellent asset quality also ensured that the provision had the space to release profits. By sector, the profit growth rate of joint-stock banks and urban commercial banks was significantly wider than that in the third quarter, both of which were the highest in the year, with a year-on-year increase of 13.4% and 11.6% respectively. The net profit of state-owned banks and rural commercial banks increased by 12.7% and 9.1% year-on-year, which was generally stable. 4. The capital strength of the industry continues to be consolidated. Under the high profit growth, the core tier 1 capital adequacy ratio of commercial banks in 2021 was 10.78%, an increase of 11bp compared with the third quarter.
At present, the safety margin of the sector is relatively high, and the asset quality constructs the safety margin of bank stocks. 1. The core investment logic of bank stocks is macroeconomic. For details, see our relevant in-depth report “how do bank stocks perform when prices rise? – summary and comparison of multiple rounds of performance of bank stocks in China and the United States”. We expect that the asset quality of listed banks will be stable in the next few years, which will build the safety margin of bank shares. 2. Banks have two main lines of stock selection. One is our long-term proposal to continue to embrace the core assets of banks: China Merchants Bank Co.Ltd(600036) , Bank Of Ningbo Co.Ltd(002142) , Ping An Bank Co.Ltd(000001) . Their performance is highly sustainable and scarce. The boom of high-quality banks is certain and long-term. First, these scarce high-quality banks have “market-oriented genes” and “run to make money” in the industry of “lying down to make money”; Therefore, in the era of banking differentiation, their growth can be valued sustainably. Second, these banks occupy the sunrise track of the financial industry: wealth management and retail; Our in-depth report estimates that the growth rate of wealth management profits in the next decade will be 21% (see detailed calculation of income, profit and market value of “wealth management industry”: the golden track with a market value of 10 trillion). The other is to choose banks with undervalued value, safe asset quality and expected successful transformation, and be optimistic about Postal Savings Bank Of China Co.Ltd(601658) , Bank Of Jiangsu Co.Ltd(600919) , Bank Of Nanjing Co.Ltd(601009) and Industrial Bank Co.Ltd(601166) .
Risk warning event: the economic downturn exceeded expectations. Outbreaks outside China repeatedly exceeded expectations. Financial regulation exceeded expectations.
