Mingming’s performance increased steadily, but the stock price was depressed and even “broke the net”. This scene is being staged in the A-share banking sector in 2021.
Since the second quarter of this year, bank shares have been in a volatile downward trend, and the share price has fallen to the “cabbage price”, which directly touched the red line of stabilizing the share price of many banks. In this case, the main shareholders and directors and supervisors of the bank frequently increased their holdings of their own shares. In this regard, many experts interviewed by the reporter of Securities Daily said that due to the concerns about the quality of bank assets and the “blood drawing” effect caused by the rise of the new energy sector, the valuation of listed banks this year is under serious pressure, but the shareholding increase measures of major shareholders and directors, supervisors and senior executives reflect their confidence in the sector. The recent central economic work conference has set the overall tone of steady growth for the economy next year. Under this background, the valuation pressure of listed banks will be significantly relieved and is expected to get out of the trough next year.
nearly 80% of bank shares broke the net
The price to book ratio of 7 is less than 0.5 times
Since last year, the performance of listed banks has fluctuated due to factors such as the epidemic, but the overall performance is relatively stable. In particular, this year’s third quarterly report is commendable. The total net profit of listed banks in the first three quarters increased by 13.61% over the same period last year, and they fought a beautiful turnaround.
However, the share prices of listed banks have not recovered synchronously with their performance. In the first quarter of this year, the banking sector had a good performance in the A-share market, which turned out to be the highlight of the year. Since the second quarter, the banking sector began a shock downward for several months. As of the closing on December 21, according to statistics, the cumulative rise and fall of the banking sector index in Shenwan industry during the year was – 2.68%, down nearly 20% from the year’s highest point set at the end of the first quarter, ranking downstream among the 31 Shenwan industry indexes, in sharp contrast to the 4.38% rise of the Shanghai stock index over the same period.
The stock prices of individual stocks of listed banks are also obviously under pressure. As of the closing on December 21, among all 41 A-share listed banks, the number of banks with negative cumulative rise and fall in share prices during the year (after restoration) reached 32, and the annual share prices of 12 banks fell by more than 10%.
The long-term downturn of stock price is directly reflected in the increasing number of “broken net” bank shares. Based on the audit data by the end of 2020, at present, nearly 80% of A-share listed banks have a share price lower than their net assets per share, of which 7 listed banks have a price to book ratio of less than 0.5 times.
“Concerns about the deterioration of bank asset quality, coupled with the ‘siphon effect’ caused by the strength of other hot market sectors, have restricted the valuation of listed banks this year.” China Merchants Securities Co.Ltd(600999) Liao Zhiming, chief banking analyst, told the Securities Daily. Since the second quarter, the banking sector has pulled back significantly, mainly because the market is worried that changes in the environment will affect the bank interest margin, resulting in the deterioration of asset quality; In recent months, some real estate enterprises have fallen into a liquidity crisis, and the events have continued to ferment, which has also affected the trend of bank stocks to a certain extent; In addition, since this year, new energy, meta universe and other market hot spots have been generated continuously, and the performance of relevant sectors has been strong, resulting in the “seesaw” effect, resulting in the outflow of institutional funds, thus affecting the performance of the banking sector.
Zheshang Securities Co.Ltd(601878) Liang Fengjie, chief analyst of the banking industry, told the Securities Daily that since March this year, the downward pressure on the real economy has continued to increase. The superposition of the tightening of urban investment and real estate financing policies has led to an increase in relevant risks, causing the market to worry about the quality of bank assets. The most important reason behind the depressed stock price trend of listed banks and large-scale net breaking is the continuous fermentation of market concerns about the quality of bank assets.
LV Changshun, chief researcher of Shanghai Zhonghe Yingtai Financial Consulting Co., Ltd., also believes that this year’s market style is biased towards overvalued and high growth stocks, which directly leads to the poor stock price trend of blue chips, especially financial listed companies in 2021.
10 banks launched stock price stabilization scheme
release positive signals to boost confidence
A large area of “breaking the net” touched the red line of stabilizing the stock price of many banks. Therefore, during the year, the bank’s major shareholders and directors, supervisors and senior executives increased their holdings for many times. This is mainly due to the commitment of listed banks to maintain stock price stability.
Since the reopening of the bank’s A-share IPO in 2016, in addition to the continuous growth in the number of listed banks, the most important change is that since then, all listed banks in the A-share market have formulated plans to stabilize the stock price. Once the closing price of the shares is lower than the bank’s net assets per share for 20 consecutive trading days, the bank’s major shareholders and directors, supervisors and supervisors will sell. At the time of continuous decline, this “specified action” gave listed bank investors a comfort.
Since the implementation of the plan to stabilize the stock price of A-share listed banks for the first time in 2018, there are not a few cases of “rush to help” by the bank’s major shareholders, directors, supervisors and senior officials due to the net breaking of the stock price, especially in 2021. Since this year, as many as 10 banks, including Postal Savings Bank Of China Co.Ltd(601658) , China Zheshang Bank Co.Ltd(601916) , Chongqing Rural Commercial Bank Co.Ltd(601077) , have issued announcements on measures to stabilize stock prices, covering all types of large state-owned banks, joint-stock banks, urban commercial banks and rural commercial banks. The number of listed banks implementing the stock price stabilization plan increased significantly compared with last year. So far, most banks have announced the completion of the implementation of the stable share price scheme, and the fastest one took only more than ten days. It is not difficult to see that the shareholders of listed banks, directors, supervisors and Gao are very determined to stabilize the stock price and act quickly.
It is worth noting that in the stable share price scheme formulated by various banks, in addition to the increase of holdings by major shareholders and directors, supervisors and senior managers, it also includes the repurchase of shares, but it has not been adopted by any bank up to now. In the future, whether banks choose to buy back shares in the implementation process to stabilize the stock price has become a major attraction.
The interviewed experts believe that the increase in bank shares held by the main shareholders of listed banks and directors, supervisors and senior managers will play a positive role, which will help boost market confidence and help restore the valuation of bank shares.
Liang Fengjie told reporters that the increase in holdings of major shareholders and directors, supervisors and senior managers of listed banks will release positive signals from both operation and valuation and enhance investor confidence. These shareholders and Dong Jiangao have a better understanding of the operation of the bank and are “people who see the cards”. They increased their holdings, reflecting their confidence in the future operation of the bank and giving investors a “reassurance”; At the same time, it also shows that the current valuation of bank shares has deviated from the fundamentals to a considerable extent and is undervalued.
She also believes that since last year, banks have stepped up efforts to make profits to the real economy, which will not lead to a decline in profitability, thus affecting the valuation of the banking sector. The guiding idea of regulation on bank profit transfer has changed marginally. In the past, the bank’s profit transfer was a unilateral zero sum profit transfer, which would put downward pressure on the bank’s profitability. However, now the bank’s profit transfer mode has been transformed into a win-win situation for the real economy and banks, that is, the supervision first issues support policies such as loans, alleviates the bank’s profit pressure from the liability side, and then guides the bank to reduce the loan interest rate and transfer profits to the entity. Finally, we will achieve a win-win situation in which the profitability of banks is stable and the financing cost of the real economy is reduced. As an industry rooted in the real economy, the banking industry not only benefits the real economy, supports the development of the real economy, but also contributes to its own development.
“The active increase in holdings by major shareholders and directors, supervisors and senior executives shows the confidence of shareholders and senior executives in the future development of the bank and sends a positive signal to the market.” Liao Zhiming said that the central economic work conference stressed that “the policy force should be moderately advanced”, the policy focus shifted to steady growth, and the economic expectation improved, which is expected to support the improvement of bank valuation; At the same time, real estate financing is relaxed, the industry is expected to bottom out, and the suppression of bank valuation will be alleviated.
LV Changshun said that the stable share price scheme continuously launched by the bank seems to boost the share price in the short term, but the key to getting rid of the bottom of historical valuation is to seek the attention of market funds. “Pay special attention to the transformation of market style. Once the investment style pursuing high valuation changes, the undervalued financial stocks represented by listed banks will be favored by funds again, and the listed banks may usher in the opportunity of value revaluation next year.”
(Securities Daily)
