After more than a year, interest rates were cut again
On December 20, the people’s Bank of China announced the LPR quotation. The 1-year LPR decreased 5bp to 3.80%, and the 5-year LPR remained unchanged at 4.65%. Since April 2020, LPR has cut interest rates again, and the RRR reduction in December has formed a “double reduction” combination fist, and the intensity of monetary policy has been strengthened.
We look forward to the policy window period in the first half of next year
The 5-year LPR mainly affects the mortgage interest rate. This quotation remains unchanged, or reflects the signal of adhering to stable regulation and control of real estate. Pay attention to another piece of information about real estate today. The people’s Bank of China and the China Banking and Insurance Regulatory Commission finally support real estate M & A loans. This shows that the regulation of real estate is supplemented by the total amount and dominated by the structure; That is to achieve a soft landing of risk by accelerating industry integration. The 1-year LPR mainly affects loan varieties other than residential housing loans. The interest rate reduction 5bp is in line with the policy objective of “promoting the steady decline of comprehensive financing cost of enterprises” put forward by the people’s Bank of China. In the first half of next year, under economic pressure, it is not ruled out that there is still the possibility of reducing interest rates and standards. However, in the macro environment of gradually raising interest rates overseas, we expect that the time window for continuous interest rate reduction may be relatively short. Therefore, the first half of next year is an important policy window period.
Broad credit expectations strengthened
The “double reduction” in the short term reduced the need for the decline of Omo and MLF interest rates, and continued to strengthen the broad credit expectation in the first half of next year. Similar policy lines can refer to the economic downturn after the 2012 financial crisis. After the people’s Bank of China lowered the reserve requirement in November 2011, after half a year, the interest rate was reduced for the first time in June 2012, and the amount of social finance increased in the second half of the same year. The reserve requirement was lowered in July this year and “double lowered” in December. Infrastructure and currency are expected to increase at the same time in the first half of next year. In the future, we need to pay attention to the fact that credit easing and interest rate reduction may reduce the allocation of bonds by banks and accelerate the transformation of bank asset liability structure.
Look forward to the follow-up policy mix
Is there any policy worth looking forward to? The first is the deposit interest rate cut. The third quarter monetary policy implementation report emphasizes continuing to optimize deposit supervision. In order to ensure the policy effect of interest rate reduction, it is necessary to reduce the debt cost of banks by reducing the deposit interest rate spread. Secondly, the people’s Bank of China and China Banking and Insurance Regulatory Commission correct the policy deviation of real estate. The regulations on real estate M & A loans released today should be the first supporting policy of regulatory coordination since the new regulations of “two centralization” at the beginning of the year. After the Political Bureau meeting and the central economic work conference, the regulatory objectives were reunified. We believe that in the future, not only will the limit of housing related loans be relaxed, but also the disposal of insurance related real estate enterprises led by supervision will be accelerated. The bank’s risk resolution will get policy help.
Investment suggestion: optimistic about the improvement of valuation after the weakening of risk impact
We believe that the scale expansion of banks is more important than interest rate spread. The spread pressure caused by asymmetric interest rate cuts can be hedged by asset expansion on and off the balance sheet. The risk problem is the reason for the stagnation of Q4 bank valuation. Policy reversal may drive the improvement of sector valuation. It is recommended to pay attention to Q1 bank targets with asset expansion ability and low risk. China Merchants Bank Co.Ltd(600036) , Postal Savings Bank Of China Co.Ltd(601658) , Wuxi Rural Commercial Bank Co.Ltd(600908) , Bank Of Ningbo Co.Ltd(002142) are recommended.
Risk tip: the economic downturn exceeded expectations, China’s foreign policy adjustment exceeded expectations, and the risk was intensively exposed
