Event: on February 22, the opinions of the CPC Central Committee and the State Council on doing a good job in the key work of comprehensively promoting rural revitalization in 2022 (hereinafter referred to as “No. 1 document”) was issued.
The incentive policy is on the way, and county banks may benefit. “Document No. 1” is a policy that has come down in one continuous line since 2017. It is proposed in the current environment of pressure on economic growth. It also means “grasping” steady growth. The necessity and strength of its implementation can be expected. “Document No. 1” has opened policy space and growth space for relevant banks. There is a possibility of further targeted RRR reduction for relevant county banks; Supporting agriculture and supporting small loans and rediscount can also reduce the capital cost of such banks.
Rural Revitalization Strategy may bring bank expansion space. The following credit demand is expected to grow: rural infrastructure loan demand, farmers’ credit loan demand, rural primary, secondary and tertiary industry linkage credit demand, and rural residents’ consumer credit demand. The balance of agriculture related loans in China is 43.2 trillion, with a growth rate lower than that of overall loans. With the promotion of Rural Revitalization Strategy, the share of relevant banks in the market is expected to increase. By the end of the fourth quarter of 2021, China’s per capita disposable income of rural residents had increased by 9.7% year-on-year, while that of urban residents was only 7.1%. The consumption potential and elasticity of the rural market were better. The Rural Revitalization Strategy is expected to open the incremental market of resident credit in rural areas.
The main focus of Rural Revitalization is in the western region. According to the list of 160 national key Rural Revitalization counties released by the National Rural Revitalization Bureau in August 2021, they are mainly distributed in the western region. Postal Savings Bank Of China Co.Ltd(601658) outlets are mainly distributed in the central and western regions, and go deep into the county, which has the advantage of proximity. Listed banks in the western region may also benefit from this. For example, there are Bank Of Chengdu Co.Ltd(601838) in Sichuan Province, Chongqing Rural Commercial Bank Co.Ltd(601077) , Bank Of Chongqing Co.Ltd(601963) in Chongqing, Bank Of Xi’An Co.Ltd(600928) in Shaanxi Province, Lanzhou bank in Gansu Province and Bank Of Guiyang Co.Ltd(601997) in Guizhou Province. Among them, Bank Of Chengdu Co.Ltd(601838) also benefits from the strategic pull of the western financial center and the Chengdu Chongqing double city economic belt, and its expansion potential is large.
Investment suggestion: steady growth will be promoted in depth, and county banks may benefit
At present, the main line of the banking sector is: wide credit → steady growth → improvement of economic expectations → valuation repair. At present, the banking sector is not only playing the game underpinning policy, but also improving the game expectation, and the market is still midway. The implementation of the “No. 1 document” for Rural Revitalization shows that steady growth has added a grasp and the overall situation is more stable. Focusing on the western counties may bring structural opportunities for the banking sector and maintain the “recommended” rating of the industry. It is suggested to pay attention to Postal Savings Bank Of China Co.Ltd(601658) rooted in the county, Bank Of Chengdu Co.Ltd(601838) with more network layout in the western region, Industrial Bank Co.Ltd(601166) , Ping An Bank Co.Ltd(000001) , China Merchants Bank Co.Ltd(600036) in high-quality joint-stock banks, and Bank Of Hangzhou Co.Ltd(600926) , Bank Of Ningbo Co.Ltd(002142) , Bank Of Jiangsu Co.Ltd(600919) in high expansion city commercial banks.
Risk warning: the policy effect is not as expected; The deterioration of asset quality accelerated.
