Core view of the industry: at present, the static valuation level of the sector is only 0.63x, which continues to be at an absolute low in history. The pessimistic expectations of the market on economic downward pressure and asset quality have been fully reflected. However, we have seen that since the fourth quarter, in the face of the downward pressure of the economy and the rise of real estate risks, the steady growth policy has been proactive, and the one-year LPR has been reduced by 5bp. The central bank’s monetary policy committee added a new formulation of “giving full play to the dual functions of the total amount and structure of monetary policy tools, and being more proactive and promising” in the fourth quarter, and the real estate policy has also ushered in marginal easing. Looking forward to the beginning of 2022, under the loose and mild regulatory environment, the bank fundamentals are expected to remain stable. It is suggested to continue to pay attention to the allocation opportunities for correcting excessive pessimistic expectations in the sector. Recommendations for individual stocks: 1) banks represented by China Merchants Bank Co.Ltd(600036) , Bank Of Ningbo Co.Ltd(002142) , Postal Savings Bank Of China Co.Ltd(601658) that give consideration to asset quality performance and wealth management ability; 2) The high-quality regional banks represented by Bank Of Chengdu Co.Ltd(601838) have significantly improved their fundamental margin and better growth than their peers.
Industry hot spot tracking: the transformation of net worth has accelerated, and the scale of financial management is approaching 28 trillion. As of 2021q3, the scale of non breakeven financial management was nearly 28 trillion, an increase of 8.3% month on month, and the single quarter expansion exceeded 2 trillion. At the same time, at the node where the transition period of the new asset management regulations is about to expire, banks have further accelerated the pace of transformation in Q3. According to the statistics of the banking wealth management registration and custody center, by Q3 of 2021, the survival scale of net worth products has reached 24.2 trillion, accounting for 86.56% compared with all non breakeven wealth management products, an increase of more than 19 percentage points compared with the end of 2020. Individually, the net worth transformation of urban and rural commercial banks has been basically completed, and there is still some pressure on large banks and joint-stock banks, which is expected to be included in the special disposal of individual cases in accordance with the regulations.
Market trend review: in December, the Banking Board rose 0.22%, 2.02 percentage points lower than the Shanghai and Shenzhen 300 index. In terms of individual stocks, bank stocks showed differentiation in December, among which Chengdu, Zijin and Societe Generale were the top gainers, with monthly increases of 7.0% / 6.0% / 5.7% respectively. Hangzhou, Ping An and Changshu led the decline, falling 6.8% / 5.5% / 3.6% respectively in a single month.
Macro and liquidity tracking: 1) the manufacturing PMI in December was 50.3%, up 0.2 percentage points from the previous month, but by item, only production was in the expansion range, demand was still weak, and the new order index was still below the boom and bust line. In terms of price, PPI increased by 12.9% year-on-year in November, down 0.6 percentage points from last month. 2) In December, the market interest rate fell narrowly, and the yield of 1 / 10-year Treasury bonds changed by – 0.3 / – 5.0bp to 2.24% / 2.78% respectively compared with the previous month. In terms of policy interest rate, the 1-year MLF interest rate in December was unchanged from the previous month at 2.95%, the lpr1 year was reduced by 5bp to 3.80% and the LPR5 year was unchanged from the previous month at 4.65%. 3) In November, financial institutions increased RMB loans by 1.27 trillion, a year-on-year decrease of 160 billion yuan.
Risk tips: 1) macroeconomic downturn leads to higher than expected pressure on industry asset quality; 2) The strength of financial supervision increased more than expected; 3) The escalation of Sino US friction has led to an increase in external risks.
