Event: on March 5, 2022, Premier Li Keqiang delivered a government work report to the fifth session of the 13th National People’s Congress on behalf of the State Council. Our comments on the impact on bank fundamentals and bank stocks are as follows:
\u3000\u30001. The intention of stabilizing growth is clear, and the demand for economic growth is enhanced. The GDP growth target in 2022 is set at about 5.5%. Under the background of new downward pressure on the economy, the government work report clearly states that “steady growth should be put in a more prominent position”, which may also mean that this round of steady growth policies will last longer and make greater efforts, In order to reverse the current “triple pressure of shrinking demand, supply shock and weakening expectation”, which will be the direct catalyst to drive the market of the banking sector.
\u3000\u30002. We will expand the scale of new credit and expand credit. Since December last year, the bill discount interest rate has fallen sharply in some stages and touched near 0, causing the market to worry about the weak demand for credit, and then questioning the sustainability of credit supply and social finance growth. However, the core reason for the rebound of social finance growth and the improvement of credit supply since October last year is supply driven. The government work report further defines the need to expand new credit loans, which actually means that the policy force will provide support for credit growth. At present, social finance growth is still in the rising channel, and it can be more optimistic when transmitted to the recovery of effective credit demand.
\u3000\u30003. Promote financial institutions to reduce the real loan interest rate, but dilute the requirement of interest transfer. For the expression of loan interest rate, it is still required to reduce the comprehensive financing cost of enterprises in 2022, which is not much different from the requirements in the previous two years. However, this year’s government work report does not mention the requirement for financial institutions to transfer profits. We expect that the policy idea of unilaterally requiring banks to reduce loan interest rates in previous years has changed to first reduce the cost of bank liabilities and then guide banks to reduce loan interest rates. For banks, the pressure on net interest margin is less than that in previous years, and we expect that the net interest margin will remain stable this year.
\u3000\u30004. Promote the significant growth of inclusive small and micro loans, and continue to increase the proportion of credit loans and first loan households, but dilute the quantitative assessment objectives. The government work reports in 2020 and 2021 set clear assessment targets for the growth of inclusive small and micro loans of large state-owned banks, but this year significantly weakened the requirements for the growth of inclusive small and micro loans of large banks. We expect that, on the one hand, the regulators will gradually realize that in promoting the sinking of the service focus of large banks and institutions, they will also cooperate with other local small and medium-sized banks Small and medium-sized financial institutions have formed competition, squeezing their living space; On the other hand, the inclusive small and micro loans of large state-owned banks grew very fast in previous years, and it was significantly more difficult to maintain a high growth rate under the high base effect. Small and medium-sized banks may be the main driving force for the growth of inclusive small and micro loans this year, and the direct competitive pressure faced by large banks may also be reduced.
Prevent and resolve financial risks, accelerate the disposal of non-performing assets, and the pressure of credit risk is expected to be further reduced. Asset quality is the core variable affecting bank valuation. Since 2018, the economy has continued to decline, and investors have many doubts about the real bad debts of banks. However, we also note that the financial risks in recent years are accelerating. From 2017 to 2021, the banking industry disposed of about 12 trillion yuan of non-performing assets and more than 600 billion yuan in the last two years, The implicit debt situation of local governments tends to improve. According to the government work report, we expect that the disposal of non-performing assets in the banking industry will remain strong in 2022, and the pressure of credit risk will be further alleviated.
In the coming months, we believe that as the steady growth policy enters the intensive landing stage, the real estate policy will be gradually relaxed and continue to be optimistic about the investment value of bank stocks.
Individual stocks can be selected along two ideas: first, the valuation is low β Strong attributes, benefiting from the implementation of steady growth policies, and focusing on Industrial Bank Co.Ltd(601166) , Postal Savings Bank Of China Co.Ltd(601658) ; Second, have α Excellent logic, fundamentals and outstanding business model. Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) , Bank Of Ningbo Co.Ltd(002142) , China Merchants Bank Co.Ltd(600036) , Ping An Bank Co.Ltd(000001) .
Risk tip: Overseas emergencies have hindered the economic recovery and accelerated the exposure of risks in the real estate industry
