event:
Recently, there have been frequent market hot events and policies, including: Evergrande announced that it was unable to fulfill its guarantee obligation of US $260 million, and the regulatory authorities immediately made a high-frequency voice to clarify that Evergrande was a case risk; After Premier Li Keqiang mentioned “timely RRR reduction”, the central bank immediately announced a comprehensive RRR reduction on December 6; The Political Bureau meeting and the central economic work conference sent a clear signal of “steady growth”.
comment:
The regulator clearly identified the Evergrande risk event as a case, and the pessimism in the real estate market was repaired. After the recent Evergrande credit default event, the regulatory authorities took many measures and made an intensive voice, and identified the Evergrande event as a case, aiming to stabilize market expectations and avoid the active “lying flat” and moral hazard of real estate enterprises through the strategy of “dealing with one and warning one”. At the same time, a package of support policies for reasonable financing in the real estate market is being gradually launched. Mortgage loans continue the pattern of “volume increase and price decrease”, and financing channels such as bonds and ABS are relaxed in an orderly manner, aiming to support the M & A of real estate enterprises and promote the normal commencement and operation of projects. Data show that the growth boom of mortgage loans further recovered in November, and residents’ medium and long-term loans increased by 582.1 billion, an increase of 77.2 billion year-on-year. In the follow-up, the development loan is also expected to reverse the negative growth trend and gradually “surface”, the reasonable financing demand of the overall real estate market will be further met, and the pessimism will be gradually repaired, which is conducive to the performance of bank stocks.
The RRR reduction in December was fully expected and recognized by the market, which helped to improve the debt cost of the banking system and the pressure of liquidity regulatory indicators. The key to the impact of the RRR reduction policy on the market is whether it can be fully expected and recognized. Different from the “unexpected” landing of the RRR reduction in July, under the background of increasing downward pressure on the macro economy and continuous fermentation of credit risk in the real estate market, the market has full expectations and cognition of the RRR reduction in December, and the disturbance to bank stocks is relatively limited. On the contrary, the introduction of the RRR reduction policy not only helps to improve the cost of liabilities in the banking market and stabilize NIM, but also improves the safety space of liquidity regulatory indicators such as LCR and nsfr, and increases the “scale of loanable funds”, so as to enhance the willingness of banks to extend credit.
The Political Bureau meeting and the central economic work conference sent a clear signal of “steady growth”. First of all, the Politburo meeting proposed to “continue to do a good job in the work of” six stabilities “and” six guarantees “,” strive to stabilize the macro-economic market “and” maintain overall social stability “, which released the signal of maintaining economic stability and supporting the bottom of the economy.
On the basis of the meeting of the Political Bureau, the central economic work conference clearly put forward the “consensus on 7 policy combinations + 5 issues”. The word “stability” was mentioned 25 times in the press release, nearly double that of 13 times in 2020 and the most in recent 8 years. More words were given to “ensuring employment, people’s livelihood and market players”, and the demand for “stable growth” was on paper. In terms of macro-control policies, it emphasizes the combination of cross cyclical and counter cyclical control policies. In the future, fiscal and monetary policies are expected to “shoot both arrows” and the prosperity of credit supply will further recover:
On the one hand, the rhythm of government bond issuance will be ahead in 2022, the physical workload will be formed as soon as possible, and the slow development of fiscal expenditure will be improved. It is expected that infrastructure investment is expected to hit the bottom and rebound in 2022. On the other hand, the aggregate monetary policy tools will still work in time, and the probability of LPR maintaining rigidity is declining. Finally, it is estimated that 21 trillion yuan of new credit will be added in 2022, which is higher than that in 2021. The real estate financing environment is expected to be continuously improved, the cash flow risk of real estate enterprises will be reduced, and stabilizing sales will be put on the agenda.
We believe that with the development of policies and the steady progress of credit easing, the “policy bottom” is expected to gradually transmit to the “economic bottom”, and the macroeconomic will stop the downward trend and rebound next year. The recovery of economic prosperity will also create a stable market environment for banking operations.
Greater efforts to broaden credit and the “warm wind” in the real estate market will help to improve the valuation of bank stocks. Since the fourth quarter, the trend of the banking sector and the real estate sector has been highly correlated. On the one hand, the real estate industry has a large scale, a long industrial chain, a wide range of economic pull, and one end is connected with local fiscal revenue
Fixed asset investment connects the basic housing needs of residents at the other end. On the other hand, loans in real estate related fields account for more than 45% of bank balance sheet loans. Non-standard financing involves a large number of shadow banking activities. The stability of the real estate market is an important part of financial stability. Therefore, with the increase of credit relief, the financing situation in the real estate market will gradually improve, bank stocks are also expected to “dance in the wind”, and the valuation level of the sector will be improved.
From the absolute level of valuation, as of December 13, the average Pb level of A-share listed banks was about 0.64 times, which has fallen to a new low in recent five years. Considering the high dividend level of the banking sector, the current banking sector has high allocation value.
Investment suggestion: we are optimistic about the performance of the follow-up banking sector. For bank stock investment, we mainly follow two main lines:
1) Bottom effect. With the restoration of pessimism in the real estate market, the listed banks that were obviously impacted by the real estate market in the early stage have been adjusted, and the bottom trend of stock price is more obvious, which is expected to obtain excess returns in the future. We recommend Ping An Bank Co.Ltd(000001) , Industrial Bank Co.Ltd(601166) .
2) Location factors. We always recommend high-quality listed banks in Jiangsu and Zhejiang. These banks benefit from the improvement of regional economic environment. In the future, credit supply is expected to continue “volume increase and price stability”, and are expected to maintain high-quality asset quality. We recommend Bank Of Nanjing Co.Ltd(601009) , Bank Of Ningbo Co.Ltd(002142) , Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) .
Risk tip: the credit extension is less than expected, and the cash flow pressure of real estate enterprises is increasing
