Key investment points:
Return to the source, the stock rectification task has been basically completed: the degree of net worth transformation of financial products has continued to improve. By the end of 2021, the survival scale of net worth financial products was 26.96 trillion yuan, accounting for 92.97%, an increase of 25.7 percentage points over the same period in 2020. The scale of principal guaranteed financial products has been cleared, and the expectation of just cashing in the market has been gradually broken. Interbank Financial Management decreased to 54.1 billion yuan, down 97.52% from before the release of the new regulations on asset management. Multi tier nesting has been greatly reduced, high-risk businesses such as complex nesting and pooled operation have been rectified and cleaned up, and the situation of capital idling from real to virtual has been fundamentally reversed.
The first year of bank financial management development: a total of 301 banking institutions and 21 Financial Management Companies in China have existing financial products, with an existing balance of 29 trillion yuan, a year-on-year increase of 12.14%. 29 wealth management companies were approved for preparation. Small and medium-sized banks participate in financial management business through consignment. The term of financial products has been gradually extended, and public offering products have an absolute advantage. The configuration of financial products is mainly fixed income, and fof products are developing rapidly.
Pay attention to the rapid growth of weak cycle business: according to our judgment in the banking investment strategy in 2022, the probability of exceeding the expected change in both scale and net interest margin is small. The diversification trend of products represented by financial management subsidiaries and the superposition of natural channel advantages will drive the expansion of financial management scale and the improvement of concentration of the whole banking system, and will further bring considerable non interest income to banks, which is more stable than interest income. In addition, while providing liquidity management, banks also increase the corresponding income return.
The undervalued value of the sector or potential risks have been implied: the current static valuation of the sector is only pb0 64 times, we think it has implied potential risks. According to the guidance on enhancing credit stability proposed by the regulator, it is expected that the growth of credit may be more balanced in the future. In addition, the regulation also said to prevent secondary financial risks in the process of dealing with risks in other areas. Expected stock risk or more cautious. In terms of incremental risk, most of the incremental credit in the past two years has increased in the government and residents, and the risk is relatively controllable. The disturbance to the quality of bank assets is also limited. The provision for non bank assets was increased in 2021. Considering that the new regulations on asset management are coming to an end and the asset return statement has come to an end, the provision for this part may be reduced. To sum up, we expect that the provision for next year may be the same as or slightly lower than this year, and the impact on the profit side is also relatively controllable.
Investment strategy: looking forward to 2022, or subject to the revision of asset quality expectations, some stocks may usher in the opportunity to improve the valuation of the sector. In the selection of individual stocks, we suggest paying attention to two main lines: first, due to the impact of the downward cycle of macro-economy, we suggest paying attention to companies with relatively weak cycle and stable growth. The second is to focus on companies whose fundamentals continue to improve and whose valuations are expected to improve.
Risk factors: the rapid clearing of debt risks has led to a sharp rise in credit spreads. If the epidemic repeatedly causes the overall economy to continue to weaken, the enterprise revenue will deteriorate significantly, and the performance of the banking sector will fluctuate.
