Market performance review
In March, the China Citic Bank Corporation Limited(601998) index fell 1.5%, outperforming the CSI 300 index by 6.3 percentage points. At the end of the month, the average Pb (MRQ) of the banking sector closed at 0.71x and the average PE (TTM) closed at 5.7x. First, the monthly arithmetic average yield of the portfolio is – 0.8%.
Important developments in the industry
(1) the central bank issued the questionnaire survey report on bankers in the first quarter of 2022. The credit demand fell year-on-year but rebounded month on month. (2) The central bank released the rating results of the central bank’s financial institutions in the fourth quarter of 2021, and the risk of the banking industry continued to decrease.
Tracking of key profit drivers
(1) the year-on-year growth rate of the total assets of the industry remained stable. The total assets of commercial banks increased by 9.3% year-on-year in February and continued to fluctuate at a high single digit level. Among them, the growth rate of total assets of large banks, joint-stock banks and urban commercial banks was 9.7% / 7.1% / 9.5% respectively.
(2) the market interest rate remained stable. 1) The monthly average yield of 10-year Treasury bonds last month was 3.12%, up 34bps month on month; The monthly average of shibor3m was 2.37%, down 4bps month on month. For a longer time, the long-term interest rate and interbank interest rate have remained roughly stable in recent months; 2) The latest lpr1y quotation is 3.70%, 5y4 60%。
(3) the solvency of industrial enterprises has declined slightly. We expect the rate of non-performing loans of banks to remain stable this year. In February, the interest cover ratio (12-month moving average) of Industrial Enterprises above designated size decreased slightly to 838% month on month, mainly due to the decline in profit growth of industrial enterprises and the reduction in the space for further improvement of solvency with the rise of PPI base. Accordingly, the loss side of industrial enterprises also increased slightly. We believe that from the perspective of marginal change, the generation rate of bank non-performing loans is expected to be stable this year, and there is little room for further improvement.
Investment advice
We expect the industry fundamentals to remain stable in 2022. Considering the current low valuation of the sector and the subsequent policy orientation of stable growth and wide credit, we are optimistic about the subsequent performance of the sector and maintain the “over allocation” rating of the industry. For individual stocks, continue to recommend Bank Of Chengdu Co.Ltd(601838) , Bank Of Ningbo Co.Ltd(002142) , Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) , Jiangsu Suzhou Rural Commercial Bank Co.Ltd(603323) , Jiangsu Zhangjiagang Rural Commercial Bank Co.Ltd(002839) , Wuxi Rural Commercial Bank Co.Ltd(600908) .
Risk tips
If the macro-economy drops sharply, it may affect the banking industry in many ways.
