Event:
On March 11, 2022, the central bank released the financial statistics for February 2022:
(1) m2 increased by 9.2% year-on-year, and the growth rate decreased by 0.6 percentage points compared with the end of January 2022;
(2) M1 increased by 4.7% year-on-year, 6.6 percentage points higher than that at the end of January 2022;
(3) RMB loans increased by 1.23 trillion, a year-on-year decrease of 125.8 billion, with a year-on-year growth rate of 11.4%;
(4) the scale of social financing increased by 1.19 trillion, a year-on-year decrease of 531.5 billion, with a year-on-year growth rate of 10.2%, down 0.3 percentage points from the end of January 2022.
Comments:
I. The Spring Festival effect makes the credit supply “low before and high after” in February. It is estimated that large state-owned banks will play a “head goose effect”, and small and medium-sized banks are relatively weak
In terms of total amount, RMB loans increased by 1.23 trillion in February, a year-on-year decrease of 125.8 billion, and a total of 5.21 trillion from January to February, a year-on-year increase of 270 billion.
From the perspective of delivery rhythm, credit delivery in February showed the characteristics of “low before high”. Generally speaking, there will be strong credit amortization characteristics during the Spring Festival, and the “year-end bonus effect” will also promote residents to reduce leverage in stages. After the Spring Festival, because production has not resumed yet, the growth of new enterprise loans is often slow before the 15th day of the first month, and the “Spring Festival effect” will lead to a large negative growth of credit.
This year’s Lunar New Year is located on February 1. The disturbance of new loans due to the Spring Festival will continue until about February 20, resulting in the characteristics of “low in the front and high in the rear” throughout the month. It is estimated that the new RMB loans of some banks will maintain a negative growth trend in the first half of the month, with greater pressure on the amortization of public loans and more significant “Spring Festival effect” dominated by retail business, which will lead to the shrinkage of bank balance sheets. Near the end of the month, the credit impulse is more obvious, and the bill discount rate reappears to zero interest rate. It does not rule out that the central bank has conducted narrow credit guidance, especially on the last working day of February, the credit growth scale of some banks is large.
From the perspective of delivery subject:
(1) it is expected that policy banks and large state-owned banks will continue to play the “head goose effect”. The credit supply in February continued the characteristics of institutional differentiation in January, that is, the credit supply boom of policy banks and large banks was relatively higher. It is expected that the credit supply in February increased year-on-year, but the range is still significantly smaller than that in January. Recently, large state-owned banks issued an announcement on serving the real economy. Since the beginning of the year, banks have made a good start in terms of business growth in various business indicators, deposits and loans and so on.
(2) the credit supply of small and medium-sized banks is still weak. In February, the credit supply rhythm of small and medium-sized banks slowed down significantly, showing the characteristics of “weak total amount and poor structure”, and the growth of bill discount + non bank loans was more significant. At the same time, small and medium-sized banks also face certain restrictions on credit granting, which are shown as follows:
On the one hand, since the beginning of the year, the monetary and financial environment has been relatively loose and the credit supply has been strong. However, after the credit funds flow to residents and enterprises, part of the funds will be used to buy financial management and time deposits, rather than production and operation or fixed asset investment. In the “zero interest rate” market of bills, it is not ruled out that there are capital idling and arbitrage.
On the other hand, it is still in the early stage of credit easing, the financing demand is mainly large enterprises, and the credit supply of large state-owned banks is booming. Small and medium-sized banks have insufficient ability to serve large enterprises, high pricing and upside down cost-benefit, resulting in significantly weaker credit supply than large state-owned banks, especially in the loan pricing of high-quality enterprises.
(3) the high-quality urban rural commercial banks in Jiangsu and Zhejiang have a high degree of prosperity in credit supply and good project reserves. Since the beginning of the year, they have put in “booming supply and demand”, and some banks have failed to meet the actual loan demand, and the increment is basically increased year-on-year. According to the operating data from January to February 2022 disclosed by Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) disclosure, from January to February 2022 Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) increased RMB loans by about 9.5 billion, an increase of about 1.7 billion over the first quarter of 2021. It is expected that the credit supply boom of high-quality urban rural commercial banks in other Jiangsu and Zhejiang regions is also high.
(4) urban and rural commercial banks in non Jiangsu and Zhejiang regions have basically continued the weak situation since November 2021. The customer base of such banks is relatively weak. Most of them are weak qualified enterprises, which are greatly disturbed by the external environment, the project reserve is not ideal, and the credit supply basically increased less year-on-year. The new RMB loans of urban commercial banks in some underdeveloped regions may decrease significantly year-on-year in February.
II. The credit supply structure continued to perform poorly, with a significant increase in corporate short-term loans + bill discount + non bank loans
Although nearly 4 trillion yuan of new credit was added in January, the structural performance was poor. For example, nearly 1.2 trillion yuan of short-term corporate loans + bills were added, an increase of more than 700 billion year-on-year. From the situation in February, the problem of credit structure is still prominent, mainly as follows:
First, there may be a false increase in credit in short-term loan impulse. In February, corporate short-term loans + bills + non bank loans increased by 895.3 billion, an increase of more than 800 billion year-on-year. Excluding the dislocation factors of the Spring Festival, the three increased by 1.94 trillion from January to February, an increase of 1.62 trillion year-on-year, accounting for about 37.28%, an increase of more than 30 percentage points year-on-year. Generally speaking, if the bank’s credit supply has an on balance sheet impulse, it will shrink off balance sheet (the new scale of undiscounted bills in February was – 422.8 billion, a year-on-year decrease of 486.7 billion). If it is not a bank impulse, it will shrink general loans under the social finance caliber. These two phenomena were reflected at the same time in February. This reflects the weak financing demand of the real economy, especially small and medium-sized enterprises, and the greater pressure of “asset shortage” of credit.
Second, the public policy has a strong effect on the medium and long-term demand for loans. In February, medium and long-term corporate loans increased by 505.2 billion, a year-on-year decrease of nearly half. From January to February, the total increase was about 2.6 trillion, a year-on-year decrease of more than 500 billion, reflecting that the activity of enterprise capital expenditure is still low. At the same time, we speculate that the new medium and long-term corporate loans since the beginning of the year may not be entirely formed by market-oriented physical workload projects, but are greatly affected by policy promotion, but this will lead to the decline of the overall capital input-output ratio. Affected by the credit default events in the real estate market, the willingness of real estate enterprises to acquire land has decreased significantly, and the land income of local governments is under pressure. In the medium and long-term corporate loans issued by banks, some funds are invested in urban investment platforms or local state-owned real estate enterprises to repay enterprise debts, pay the loans of upstream and downstream supply chain enterprises and provide financial support for local governments, This has led to more bank and government investment.
Third, the weakening trend of mortgage demand is further deepened, and there is still room for substantial downward pricing. In February, residents’ medium and long-term loans increased by – 45.9 billion, a year-on-year decrease of more than 450 billion. From January to February, the total increase was 696.5 billion, a year-on-year decrease of 659.6 billion. Real estate demand continued to decline, reflecting a strong wait-and-see sentiment among residents. At the same time, this year’s Lunar New Year holiday is from the end of January to the beginning of February. Considering the poor sales in the early stage and the pressure of mortgage loan amortization during the Spring Festival, it is reasonable that mortgage loans showed an incremental shrinking trend in February.
At present, the regulatory stability maintenance policy for real estate has entered the demand side. Some cities have introduced policies, including but not limited to mortgage interest rate, first set of recognition standards, down payment ratio, etc. we expect that after the “two sessions”, there will be continuous stimulus measures on the demand side to stabilize housing sales. We judge that under the pressure of supply and demand, the interest rate of follow-up mortgage loans still has a significant downward space. Through the further deregulation of the pricing end, we can stimulate the heating up of residents’ demand for house purchase, and then play a role in stabilizing the sales of the real estate market.
In this process, the leverage ratio of enterprises will migrate to the residential side to buy time for the establishment of a virtuous circle in the real estate industry.
III. The contraction of on balance sheet loan financing and undiscounted bills led to the new social finance significantly lower than expected in February
In February, social finance increased by 1.19 trillion, a year-on-year decrease of 531.5 billion. The year-on-year growth rate of social finance stock was 10.2%, down 0.3 percentage points from January. The sharp weakening of social finance growth is mainly due to the contraction of on balance sheet loan financing and undiscounted bills.
On the one hand, the high growth of non bank loans has led to a sharp contraction of on balance sheet financing. In February, the new RMB loans under the social finance standard were 908.4 billion, a year-on-year decrease of 432.9 billion. Non bank loans increased by 179 billion, an increase of 161 billion year-on-year.
Undiscounted bills, on the other hand, increased significantly. In February, the new scale of undiscounted bills was – 422.8 billion, a year-on-year decrease of 486.7 billion. The reasons are as follows: first, the discount scale of on balance sheet bills was large in February, which consumed off balance sheet acceptance. Second, under the background of insufficient effective demand, enterprises are less willing to issue invoices. Therefore, this can also explain why the “zero interest rate” market of bills reappeared in February, and the increase of the contradiction between supply and demand is the main reason.
In February, the net financing of corporate bonds was 337.7 billion, an increase of 202.1 billion year-on-year. In terms of splitting items, the net financing of SCP in February was 134.2 billion, an increase of about 110 billion year-on-year, which is the main contributor to the increase of corporate bonds. From January to February, the net financing of SCP was 342.9 billion, an increase of about 300 billion year-on-year. This reflects that since the beginning of the year, the direct financing market is mainly short-term varieties. The funds may be used to alleviate the pressure of enterprise cash flow and pay employees’ wages, but may not be used for actual operation.
IV. The Spring Festival effect leads to the migration of resident deposits to enterprise deposits
The year-on-year growth rate of M2 in February was 9.2%, down 0.6 percentage points from the end of January. From the perspective of deposit structure, the deposit growth in February reflects a strong “Spring Festival effect”.
In February, resident deposits increased by – 292.3 billion, a year-on-year decrease of 3.55 trillion. Corporate deposits increased by 138.9 billion, an increase of 2.56 trillion year-on-year. In fact, the “seesaw effect” of residents’ and enterprises’ deposits conforms to the law of the Spring Festival, that is, this year’s Spring Festival is located on February 1, and wages and bonuses are paid in January, which will lead to the migration of enterprise deposits to residents’ deposits in January, and the migration of deposits from joint-stock banks and urban commercial banks to state-owned banks and rural financial institutions. In February, with residents returning to work one after another, It will also cause the return of residents’ deposits to the enterprise side.
In February, fiscal deposits increased by 600.2 billion, an increase of 1.45 trillion year-on-year, which is related to the increase in local bond issuance in February. However, the net financing of government bonds in February was 272.2 billion, an increase of only 170.5 billion year-on-year, which is still quite different from the year-on-year increase of fiscal deposits. We do not rule out that this may be related to the transfer of profits of specific state-owned enterprises to the finance.
The year-on-year growth rate of M1 in February was 4.7%, 6.6 percentage points higher than that in January, which is related to the dislocation of the Spring Festival and the low base effect of last year to a certain extent. The data show that the M1 balance increment in February 2021 was – 3.2 trillion, while the M1 balance increment in February this year was 774.1 billion.
V. the expectation of “wide credit” can still be continued and continue to be optimistic about small banks in high-quality areas
Although the financial data in February are affected by some dislocation factors of the Spring Festival, both the structural problems reflected in the total data from January to February and the sharp weakening of the single month data reflect that the problem of insufficient effective demand of the real economy is more prominent, as follows: (1) the real estate market is still depressed; (2) There is pressure on the growth of residents’ income and consumption; (3) The urban investment department has more financing, but effective investment has not yet been formed.
The 2022 government work report clearly puts forward the GDP growth target of about 5.5%. The report also puts forward statements such as “strengthening the implementation of prudent monetary policy”, “expanding the scale of new loans” and “promoting financial institutions to reduce the actual loan interest rate”. Combined with the current economic and financial environment, the need for interest rate reduction has increased significantly in the near future. It is not ruled out that there will be a simultaneous reduction of reserve requirements and interest rates, so as to stimulate total demand and stabilize credit supply. We estimate that the loan increment in 2022 will change from “equivalent increment” to “equivalent growth rate” compared with that in 2021. The annual new RMB loans will be about 22 trillion, and the growth rate will remain at about 11.5%.
Under this logic, there is continuity in the market’s expectation of “wide credit and stable growth”, and there are strong expectations for the further overweight of the wide credit policy. We judge that more relevant policies conducive to the formation of physical workload will still be introduced in the future. At present, it is still in the transmission process from wide currency to wide credit. The logic of “stable growth – stable investment – stable credit” is still tenable.
In terms of specific investment logic, we are still optimistic about high-quality regional local banks such as Jiangsu, Zhejiang and Chengdu Chongqing economic circle. These banks’ credit supply is relatively “prosperous in both supply and demand” and their business performance is more uncertain. It is suggested to pay attention to Bank Of Nanjing Co.Ltd(601009) , Bank Of Hangzhou Co.Ltd(600926) , Bank Of Jiangsu Co.Ltd(600919) , Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) , Bank Of Chengdu Co.Ltd(601838) .
Vi. risk warning
The downward pressure on the macro economy is not as wide as expected, and the follow-up credit pressure is increased.
