Core view
At the beginning of 2022, the market of bank shares has achieved a “good start”. In January and February 2022 (the range of February is from 7 to 18), China Citic Bank Corporation Limited(601998) index rose or fell by 2.47% and 4.96% respectively, and obtained an excess return of 10.09pct and 3.04pct respectively compared with Shanghai and Shenzhen 300 index. Among them, Industrial Bank Co.Ltd(601166) / Bank Of Hangzhou Co.Ltd(600926) / Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) / Wuxi Rural Commercial Bank Co.Ltd(600908) / Jiangsu Suzhou Rural Commercial Bank Co.Ltd(603323) shares performed better, with an increase of 9.63% / 7.59% / 6.64% / 7.18% / 7.21% respectively from February 7 to 18. Compared with the CSI 300 index, they obtained an excess return of 7.71pct/5.67pct/4.72pct/5.26pct/5.29pct respectively. The recent “good start” of bank stocks is mainly due to the wide credit already on the road, excellent bank fundamentals, marginal relaxation of real estate policy and the continuous increase of monetary policy.
Broad credit already on the road: in January, the social finance exceeded the expectation of “a good start”, and the RMB loan “increased in total and had a good structure”. In January 2022, the scale of social financing increased by 6.17 trillion yuan, an increase of 984.2 billion yuan year-on-year, significantly exceeding market expectations. In January, RMB loans increased by 3.98 trillion yuan, an increase of 394.4 billion yuan over the same period last year, including 2.1 trillion yuan of medium and long-term loans for new enterprises, accounting for 50% of new RMB loans. Although the situation of short-term loans + bill impulse still exists, the credit structure has begun to improve significantly. In addition, with the dual efforts of fiscal policy and monetary policy, medium and long-term infrastructure / inclusive small and micro enterprises / green loans increased by 3.82 trillion / 4.13 trillion / 3.86 trillion respectively in 2021, both exceeding the new real estate loans by 3.81 trillion. Medium and long-term loans for high-tech manufacturing also achieved a high growth rate of 32.80% in 2021, showing the full determination of regulators to transform the driving force of economic structure, Infrastructure / Green / high-end manufacturing / inclusive small and micro loans with strong policy support are expected to remain an important fulcrum of credit relief in 2022. At present, the loan term structure and industry delivery structure have been greatly improved, waiting for the implementation of wide credit.
Excellent bank Fundamentals: the performance of listed banks in 2021 is beautiful. It is expected that banks will “increase in volume, stabilize price and improve quality” in 2022. Since January 2022, listed banks have successively issued performance forecasts for 2021. In the joint-stock banks, China Merchants Bank Co.Ltd(600036) / Industrial Bank Co.Ltd(601166) and Ping An Bank Co.Ltd(000001) it is expected that the growth rate of net profit attributable to parent companies in 2021 will be as high as 23.20% / 24.10% / 25.60%, and the performance of top students Bank Of Jiangsu Co.Ltd(600919) and Bank Of Ningbo Co.Ltd(002142) in urban commercial banks will continue to increase. It is expected that the year-on-year growth rate of revenue and net profit attributable to parent companies in 2021 will be 22.58% / 30.72% and 28.24% / 29.67% respectively. It is expected that the performance of the bank will continue to improve in 2022 under the support of “increased volume, stable price and high quality”. Price stability: in the context of interest rate reduction, the net interest margin of banks has been under pressure, but before that, the regulators have continuously restricted the behavior of commercial banks to solicit deposits at high interest rates, twice lowered the reserve requirement to release a large number of low-cost funds, and the reform of deposit interest rate pricing mechanism has reduced the self-discipline upper limit of long-term interest rate. The cost reduction of bank liabilities has achieved remarkable results, which has provided a sufficient cushion for the reduction of asset-side yield, It is expected that the net interest margin will decline slightly in 2022. Volume increase: under the broad monetary overweight, the bank’s credit volume is imminent. The loose monetary environment is conducive to the recovery of financing demand of the real economy, giving birth to the bank’s credit volume. In 2022, the logic of “compensating price by volume” of banks is clear. High quality: the marginal easing of policies in the real estate industry + the optimization of credit supply structure are conducive to the risk mitigation of commercial banks. With the increase of the proportion of loans in infrastructure / Green / high-end manufacturing industries, the pressure on banks to generate non-performing loans will also be reduced.
Marginal easing of real estate policy: favorable for bank risk mitigation and downward pressure on real estate loans. Since September 2021, the regulators have frequently voiced their voice to correct the deviation of policy implementation in the real estate industry, which has alleviated the bad pressure of banks. According to the data released by the cbcirc, the state-owned banks and joint-stock banks achieved a “double decrease in the amount and rate of bad loans” at the end of 2021, and the rate of bad loans decreased by 6BP and 3bp respectively compared with the end of the third quarter. In January 2022, LPR (five years) decreased by 5bp, which is conducive to promoting the recovery of the sales end of the real estate industry, alleviating the cash flow pressure of real estate enterprises and continuously reducing the concerns about the quality of bank assets. In addition, on February 8, 2022, the central bank issued the notice on excluding the loans related to indemnificatory rental housing from the concentration management of real estate loans, which made it clear that the loans related to indemnificatory rental housing projects were not included in the concentration management of real estate loans, alleviating the pressure drop of Bank real estate loans. In the first quarter, the broad currency continued to be overweight. In the context of the increasingly strong expectation of the Federal Reserve to raise interest rates, the first quarter is an important window period of China’s monetary policy this year. From the central bank’s statements such as “opening the monetary policy toolbox wider”, “maintaining aggregate stability and avoiding credit collapse”, “structural monetary policy tools should actively do a good job in” addition “, the continuous overweight of wide currency in the first quarter is a high probability event, which is conducive to the improvement of bank credit and risk expectations, and promote the continuous improvement of bank fundamentals.
Investment advice
The broad credit, excellent bank fundamentals, marginal relaxation of real estate policy and the overweight of broad monetary policy have catalysed the beautiful performance of bank stocks since 2022. Looking forward to 2022, the bank’s performance will continue to improve under the support of “increased volume, stable price and high quality”. In the first quarter, the monetary policy can be extended, the credit environment rebounds, the safety margin of bank stocks is still, and the allocation value is prominent. Therefore, we suggest paying attention to joint-stock banks and urban commercial banks with strong performance growth momentum and high-quality regional economic environment.
Risk tips
The implementation of monetary policy is less than expected; Macroeconomic growth slowed down.
