main points
Policy choice and market performance under “cross cycle” regulation. (1) Monetary policy choice. The core idea of cross cycle regulation lies in the word “balance”, that is, to balance the relationship between short-term and long-term, China and the world. The direction of monetary policy in the next stage is as follows: first, the RRR reduction does not mean “flood”. In the short term, the central bank will let the banking system operate under the framework of structural liquidity shortage for a period of time, during which it will mainly maintain a reasonable abundance of liquidity through “peak cutting and valley filling” of Omo + MLF; Second, structural monetary policy tools will play a greater role; Third, the need to stimulate “total demand” through interest rate relaxation is increasing, and it does not rule out that there is still room for LPR to be reduced. (2) Under the cross cycle regulation, the credit supply is smoother and there will be no “credit pulse”. In the future, there will be a large amount of credit in the banking industry. The new credit in the fourth quarter is expected to increase year-on-year. The credit can achieve a “good start” in 2022, but it is expected that there will be no sharp credit pulse. (3) Under cross cycle regulation, the fluctuation of capital interest rate is smaller. Dr007 will still operate in shock, the form of interest rate corridor is relatively stable, and the upward space of 1y national stock NCD interest rate is limited. (4) Performance of bank stocks. Under cross cycle regulation, the bank index is expected to usher in a wave of rebound. However, considering that the upward amplitude of the credit pulse will not be too large, the upward slope of the bank index will be relatively flat, but the bottom has been relatively clear.
Banking business outlook in 2022 under “cross cycle” regulation. (1) Scale: in 2022, the scale of new credit will remain at 21 trillion, with a growth rate of about 10.8%. In 2022, the new social finance will be about 32-33 trillion, with a growth rate of 10.2-10.5%. (2) Structure: the marginal “deregulation” of real estate loans is moderate, priority is given to supporting housing mortgage loans, and the growth rate of development loans has become positive; Infrastructure loans are expected to maintain a certain intensity, and the impact of “Document No. 15” will not be too great; Manufacturing loans maintained double-digit growth, and the high-tech sector grew rapidly; Green loans are expected to achieve further increment driven by policies; Pratt & Whitney small and micro loans showed “volume increase and price decrease”. (3) Nim: on the asset side, ① the trend of follow-up loan interest rate may still be “stable and somewhat lower”, ② debt cost control measures continue to be effective, and Nim is expected to further narrow the space. (4) Non interest income: wealth management continued to make efforts, and net other non interest income returned to normalization. The bank will increase the layout of wealth management business and further promote financial transformation, which will provide strong support for the increase of handling charges. (5) Asset quality: the non-performing rate is generally stable. In the context of the recovery of the real estate financing environment, the potential asset quality pressure of real estate related assets on the bank’s balance sheet is expected to be mitigated, but the off balance sheet risk is still large. (6) Capital: capital replenishment still needs to maintain a certain intensity, and the selected banks of d-sibs face higher capital requirements. (7) Profitability: looking forward to the fourth quarter and the whole year of 2022, the poor growth rate of revenue and profit in the fourth quarter continues to move from “differentiation” to “convergence”; Under the cross cycle arrangement, the annual revenue in 2022 has strong support, the profit growth rate is slightly higher than the revenue by about 2 percentage points, and the fundamentals and valuation of high-quality banks will continue to show “the strong will always be strong”.
Investment advice Since August, bank stocks have begun to enter the bottom shock range. We are generally optimistic about the follow-up trend of bank stocks: on the one hand, under cross cycle regulation, the bottom of banks is relatively clear and the risk of allocating bank stocks is small. On the other hand, the pessimism in the real estate market has been repaired, and the wide credit is expected to be gradually promoted, which is conducive to the performance of bank stocks. For bank stock investment, three main lines are mainly followed:
1) As the pessimism in the real estate market has been repaired, the listed banks that were obviously impacted by the real estate market in the early stage have made an obvious bottom trend of stock price after early adjustment, and are expected to obtain excess returns in the future. Ping An Bank Co.Ltd(000001) , Industrial Bank Co.Ltd(601166) are recommended.
2) We always recommend high-quality listed banks in Jiangsu and Zhejiang. These banks benefit from the improvement of regional economic environment. In the future, credit supply is expected to continue “volume increase and price stability”, and are expected to maintain high-quality asset quality. Bank Of Nanjing Co.Ltd(601009) , Bank Of Ningbo Co.Ltd(002142) , Bank Of Hangzhou Co.Ltd(600926) , Bank Of Jiangsu Co.Ltd(600919) , Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) are recommended.
3) Head banks with high fundamentals benefit from the dual factors of strong interest margin toughness and continuous development of wealth management. Net interest income and non interest income are expected to continue to record better performance than peers. China Merchants Bank Co.Ltd(600036) is recommended.
Risk analysis: the downward pressure on the macro economy has increased, the risk of real estate enterprises has been further released, and the wide credit is less than expected
