Key investment points:
The excess returns of the banking sector often appear in the period of economic recovery, when the macro economy shows signs of improvement or at the turning point of monetary and fiscal policy. From the perspective of 2021, in the first quarter, when the macro economy was gradually repaired and the bank fundamentals appeared an inflection point, we walked out of a brighter market. Since July, repeated epidemics in some areas and real estate control policies have led to the contraction of the demand side, and the rise in energy prices has led to the increase in the cost of downstream enterprises. The superposition of multiple factors has brought downward pressure on the macro economy during the year, and the correction of the banking sector is obvious. With the policy correction and support, PMI rebounded in November and returned to above the dry and prosperous line after falling for two consecutive months. However, in the face of the repeated disturbance to the economy caused by local epidemics, China's consumption is still weak. With the gradual repair of foreign supply chains and the influence of high base effect, the support of exports decreases. In the first half of next year, China's economy may still face some downward pressure in the steady repair.
Policies create a good environment for the banking sector. The economic work conference held in December required that next year's economic work should be "stable and make progress while maintaining stability". The monetary policy is expressed as "flexible and appropriate, maintain reasonable and sufficient liquidity", and steady growth has become the primary policy goal. As the keynote of the real estate policy is "stable and healthy development", it is expected that the real estate policy in 2022 will continue the marginal improvement trend since the fourth quarter, and the financing policy for enterprise and resident loans will be relaxed. At the same time, the "policy for city" policy is expected to be launched one after another to promote the recovery of the real estate market.
The fundamentals are constantly repaired and the cost performance is outstanding. In 2021, the operating performance of listed banks continued to improve, and the growth rate of operating revenue and net profit continued to increase in the third quarter. At the same time, the internal differentiation was obvious, and the performance growth rate of high-quality banks was much higher than that of the industry as a whole. Looking forward to next year, first, due to the improvement of real estate credit, the loan in carbon peak, carbon neutralization and Pratt & Whitney small and micro loans, the credit is expected to maintain a steady growth. Second, with the LPR interest rate repricing basically completed, the impact of adverse factors has been basically eliminated. At the same time, through actively adjusting the asset liability structure and the reform of self-discipline pricing mechanism, the deposit cost has been reduced, the downward pressure on the net interest margin has been reduced, and the net interest margin of some banks has begun to rise. Third, the growth of commission income has become an important growth driver of performance, the proportion of non interest income has been increasing, under the restriction of net capital, the traditional credit expansion has peaked, and the transformation of wealth management and trading banks has become the second growth curve of banks. Fourth, the quality of assets has reached the best in history, the gap between overdue loan ratio and non-performing loan ratio has narrowed, the indicators related to forward-looking asset quality such as attention rate have been improving, the more prudent non-performing identification standards in the early stage have been prepared for individual risks that may be exposed.
Looking forward to next year, the macroeconomic pressure is still on, but the marginal easing of monetary policy, more accurate policy investment to underpin the macro economy, and the marginal repair expectation of banking sector valuation is significantly increased. Excellent profitability release and good asset quality guarantee promote the improvement of valuation. The marginal improved policy environment creates a good external environment for bank operation. The decline of market interest rate also promotes the improvement of investment income and debt cost. It is expected that the annual performance will continue to maintain steady growth. From the two dimensions of ROA and non-performing rate of listed banks in the first half of 2021, banks with better profitability and better asset quality are often valued by the market. It is suggested to pay attention to three main lines: first, large banks with low valuation, perfect network layout and obvious debt side advantages, such as Postal Savings Bank Of China Co.Ltd(601658) ; Second, high-quality banks with high business model and customer structure and long-term growth momentum, such as Ping An Bank Co.Ltd(000001) , China Merchants Bank Co.Ltd(600036) and Industrial Bank Co.Ltd(601166) ; Third, regional urban and rural commercial banks with strong regional economic strength, clear strategy and rapid development speed, such as Bank Of Chengdu Co.Ltd(601838) , Bank Of Changsha Co.Ltd(601577) , Bank Of Nanjing Co.Ltd(601009) , Bank Of Jiangsu Co.Ltd(600919) , Bank Of Ningbo Co.Ltd(002142) , etc.
Risk tip: the macro economy has dropped sharply and the monetary policy has been adjusted.
