Highlights Review & focus next week – important news last week: 1) a number of listed banks released their annual reports for 2021. From the perspective of business indicators, the fundamentals of listed banks remained stable. The revenue and profit growth of most listed banks further improved on the basis of the first three quarters. In terms of asset quality, the generation of non-performing assets increased, but the intensity of non-performing disposal increased, and the overall non-performing rate remained at a low level, The level of provision coverage is further abundant; 2) The interbank lending center announces the latest quoted interest rate of LPR. The one-year LPR interest rate is 3.70% and the five-year LPR interest rate is 4.60%, unchanged from the previous month. We believe that the long-term and short-term LPR quotation is the same as last month, which is the result of the joint action of money market and economic fundamentals, which is in line with expectations as a whole; 3) The central bank released the rating results of financial institutions in the fourth quarter of 2021. The results show that most institutions are within the safe boundary (level 1-7), and high-risk institutions (level 8-D) have decreased for six consecutive quarters, more than half of the peak pressure drop. Announcement of important companies: Bank Of Ningbo Co.Ltd(002142) president candidate landing Bank Of Chongqing Co.Ltd(601963) 13 billion convertible bond project was successfully issued Industrial Bank Co.Ltd(601166) the change of the largest shareholder China Everbright Bank Company Limited Co.Ltd(601818) chairman resigned. Next week’s focus: on Thursday, the National Bureau of statistics released the PMI data of manufacturing industry in March.
Market and valuation review – the excess return of the banking sector was significant last week. (1) In the recent week, the Shenwan bank index fell by 0.12%, while the CSI 300 index fell by 2.14% in the same period. The banking sector outperformed the CSI 300 index by 2.02%, ranking 11th among 31 Shenwan level industries; (2) Among the sub sectors, Dahang performed better, with the index rising 1.36%, outperforming the CSI 300 index by 3.50%; The performance of stock banks was poor, and the index fell 1.02%; (3) In terms of individual stocks, the performance continued to differentiate. The top gainers were Bank Of Ningbo Co.Ltd(002142) (4.70%), Bank Of Jiangsu Co.Ltd(600919) (3.39%) and Bank Of Nanjing Co.Ltd(601009) (2.67%), while the top gainers were Bank Of Chongqing Co.Ltd(601963) (- 9.17%), Bank of Lanzhou (- 5.91%) and Zhejiang Shaoxing Ruifeng Rural Commercial Bank Co.Ltd(601528) (- 3.56%). Bank stock valuations remain low. At the end of last week, the overall Pb of the banking sector was 0.59 times and the CSI 300 component stocks were 1.47 times. From the long-term trend, the valuation deviation of the banking sector from the CSI 300 component stocks is 92% of the historical quantile since 2013, and the sector is deeply undervalued.
Interest rate and exchange rate trend – the capital interest rate rose slightly last week. The 7-day reverse repo rate in the inter-bank market increased by 15bps to 2.22%, the overnight Shibor rate increased by 0.9bps to 2.00%, and the 7-day Shibor rate increased by 13.4bps to 2.21%. Last week, the central bank did not conduct MLF operation, and the open market realized a net investment of 50 billion yuan. In terms of exchange rate, the US dollar against RMB (CFETS) closed at 6.3663 last weekend, up 22 points from the previous weekend; The US dollar closed at 6.3835 against the offshore RMB, up 164 points from the previous weekend.
Investment proposal and investment object
Combined with the 2021 annual reports of several listed banks this week, the profit growth rate of most banks is further improved compared with the third quarterly report, and the asset quality is stable and good. Looking forward to the second quarter, we believe that the actions on the sector can be sufficient: 1) the marginal easing of real estate policy is conducive to the credit risk mitigation of banks, especially considering that after the continuous liquidation of asset quality in the industry in the past 3-4 years, the pressure of non-performing generation is expected to be controllable, and the asset quality performance is expected to remain stable; 2) The goal of China’s steady growth is clear. In the face of the pressure of the current economic environment outside China, it can be predicted that more steady growth policies in 22 years are expected to continue to work, contribute to the improvement of economic expectations and provide effective support for the fundamental operation of banks; 3) At present, the static valuation level of the sector is only 0.59x, which is still at a historical low. The pessimistic expectations of the market for the macro-economy and the quality of bank assets are fully reflected. During the performance disclosure period, we believe that the confirmation of performance improvement is expected to become the catalyst of the sector market. We suggest to pay active attention to it and continue to maintain the “optimistic” rating of the industry.
(00236 ; 2) Undervalued targets represented by Industrial Bank Co.Ltd(601166) ( Industrial Bank Co.Ltd(601166) , not rated) and Postal Savings Bank Of China Co.Ltd(601658) ( Postal Savings Bank Of China Co.Ltd(601658) , not rated); 3) Urban rural commercial banks with strong regional economic advantages represented by Shanghai Rural Commercial Bank Co.Ltd(601825) ( Shanghai Rural Commercial Bank Co.Ltd(601825) , not rated), Bank Of Chengdu Co.Ltd(601838) ( Bank Of Chengdu Co.Ltd(601838) , not rated), Bank Of Nanjing Co.Ltd(601009) ( Bank Of Nanjing Co.Ltd(601009) , not rated).
Risk tips
The economic downturn exceeded expectations, resulting in higher than expected pressure on the asset quality of the industry.
The liquidity risk of real estate enterprises continues to spread, disturbing the asset quality of banks.
The strength of financial supervision rose more than expected.
