Core summary
Core view of the industry: there is still room for valuation repair, and the annual report focuses on the quality of earnings. According to the performance express currently disclosed, under the downward pressure of the economy in the fourth quarter of 21, the fundamentals of most listed banks remained stable, the growth rate of revenue increased steadily, the asset quality was generally stable, the two ends of asset negative expanded steadily, and the profit growth maintained high growth. Looking forward to the first quarter of 2022, the gradual implementation of the steady growth policy is expected to support the fundamentals of banks. At present, the static valuation level of the sector is only 0.64x, which is still at an absolute low in history and has a sufficient margin of safety. We are still optimistic about the valuation repair opportunities of the sector under the excessively pessimistic expectation of the economy and the quality of bank assets. Recommendation of individual stocks: 1) a bank with both asset quality performance and wealth management ability represented by China Merchants Bank Co.Ltd(600036) , Bank Of Ningbo Co.Ltd(002142) , Postal Savings Bank Of China Co.Ltd(601658) ; 2) High quality regional banks represented by Bank Of Chengdu Co.Ltd(601838) have significantly improved their fundamentals and margins, and their growth is better than that of their peers.
Industry hot spot tracking: industry supervision is becoming stricter, and attention is paid to the supplementary strength of internal capital. Facing the strict requirements of capital supervision and the needs of expansion, both large and small banks are under certain pressure to supplement capital. Among them, the capital adequacy level of major banks is generally high, and the core Tier-1 capital adequacy ratio of the four major banks exceeds the regulatory requirements by more than 2%. However, due to the additional regulatory requirements of TLAC, there will also be some pressure on capital replenishment in the future, but considering the expansion of China’s capital replenishment tools, the overall pressure on compliance is limited. Compared with large banks, the urgency of capital replenishment of some joint-stock banks and urban commercial banks in China is more obvious. As of the third quarter of 2021, CITIC, Minsheng and Huaxia were among joint-stock banks, and Chengdu, Qingdao and Wuxi were among regional banks. The distance between the core Tier-1 capital adequacy ratio and the regulatory bottom line is less than 1%. In the face of capital pressure, we can see that most of them are actively supplementing the core Tier-1 capital through external financing in the form of convertible bonds, fixed increase and share allotment. However, in the long run, we believe that commercial banks should pay more attention to the improvement of profitability, optimize the efficiency of capital use and seek a lighter capital development model. Specifically, increasing the expansion of light capital consumption businesses such as wealth management, retail finance and inclusive finance is the key breakthrough direction of commercial banks. We are optimistic that banks with relevant resource endowment advantages can win the competition.
Review of market trend: in February, the banking sector rose 1.01%, outperforming the CSI 300 index by 0.62 percentage points, ranking 19th in 30 sectors according to the first-class industry of CITIC. Bank stocks rose and fell in February, among which Suzhou, Societe Generale and Chengdu were the top gainers, rising 6.3%, 5.7% and 2.9% respectively in a single month. Ningbo, qingnongshang and CITIC were the top gainers, falling 2.5%, 2.1% and 1.1% respectively in a single month.
Macro and liquidity tracking: 1) in February, the manufacturing PMI was 50.2%, up 0.1 percentage points from the previous month, and the manufacturing boom level increased slightly. Among them, the PMI of large / medium / small enterprises were 51.8% / 51.4% / 45.1% respectively, with a month on month ratio of + 0.2% / + 0.9% / – 0.9%. Large and medium-sized enterprises continued the boom, and the business pressure of small enterprises remained high. 2) In February, the one-year MLF interest rate remained unchanged at 2.85%, and the lpr1 one-year / five-year period was flat compared with the previous month, with 3.70% and 4.60% respectively. The market interest rate rose month on month. The yield of 1 / 10-year Treasury bonds in February rose 5.9/7.7bp to 2.02% / 2.78% respectively compared with the previous month. 3) The credit data in January 2022 was in line with expectations. RMB loans increased by 3.98 trillion yuan in a single month, an increase of 400 billion yuan over the same period last year, and the stock growth rate was 11.5%, 0.1 percentage point lower than that of the previous month, falling for six consecutive months.
Risk tips: 1) macroeconomic downturn leads to higher pressure on industry asset quality than expected; 2) The strength of financial supervision increased more than expected; 3) The escalation of Sino US friction has led to an increase in external risks.
