Industry core view: Policy correction is expected to improve and continue to be optimistic about valuation repair. From the perspective of the steady growth rate at both ends of the annual report, the growth rate of most banks’ assets has remained stable in the second quarter of the year, and the quality of their annual reports has remained stable. At present, the growth rate of banks’ assets has remained stable in the second quarter of the year. Looking forward to the second quarter of 2022, with the force of steady growth policy and the correction of real estate policy, the industry will still be in the channel of negative expectation improvement. At present, the static valuation level of the sector is only 0.63x, which is still at an absolute low in history and the margin of safety is sufficient. We are still optimistic about the valuation repair opportunities of the banking sector. Recommendations for individual stocks: 1) high quality regional banks represented by Bank Of Chengdu Co.Ltd(601838) with obvious improvement in fundamentals and margin and better growth than peers; 2) The bank, represented by China Merchants Bank Co.Ltd(600036) , Bank Of Ningbo Co.Ltd(002142) , Postal Savings Bank Of China Co.Ltd(601658) , is a bank that takes into account both asset quality performance and wealth management ability.
Industry hot spot tracking: the annual reports of listed banks were disclosed, and the performance maintained high growth. In 2021, the net profit of 22 major listed banks increased by 13.2% year-on-year, 0.8pct slower than 14.0% in the first three quarters of 2021. In terms of individual stocks, Ping An, Societe Generale and China Merchants Bank among large and medium-sized banks grew rapidly. In terms of scale, the overall asset scale growth of major listed banks at the end of 2021 was higher than that of Q3, and the total assets increased by 7.8% (vs6.9%, 21q3) year-on-year, of which the loan growth increased by 11.3% (vs10.9%, 21q3) year-on-year, stabilizing and recovering, which is in line with our previous expectation of the effect of stabilizing credit policies. Among them, the scale growth of large banks is the most obvious. In terms of interest margin, the net interest margin of the main listed banks in 2021 is estimated to be 2.16% at the beginning and end of the period, down 2bp from the first half of the year. We believe that it is mainly related to the pressure on asset side loan pricing. Looking forward to the subsequent quarters, the downward pressure on the economy is increasing. We expect that there is still further downward pressure on asset side pricing, and the improvement of liability side cost rate is relatively limited. Generally speaking, there is still downward pressure on the interest margin performance of listed banks. In terms of asset quality, the overall performance of the industry remained stable. At the end of 2021, the non-performing rate of major listed banks continued to decline by 5bp to 1.34% month on month, lower than the pre epidemic level. The provision coverage level increased by 8% to 239% month on month compared with Q3, and the allocation ratio decreased by 1bp to 3.19%. We believe that under the bottom line thinking of supervision, the probability of large-scale credit risk release is small, and the overall non-performing burden of the industry has been resolved relatively fully in the past. It is expected that the pressure of non-performing generation is controllable, Asset quality performance is expected to remain stable.
Market trend review: in March, the banking sector fell by 1.5%, outperforming the CSI 300 index by 6.3 percentage points, ranking seventh in 30 sectors according to the first-class industry of CITIC. In terms of individual stocks, banking stocks rose and fell, with Lanzhou, CITIC and Jiangyin leading the gains, rising 11.4%, 10.7% and 10.0% respectively in a single month, while Xi’an, industrial and merchants led the declines, falling 6.4%, 6.3% and 6.0% respectively in a single month.
Macro and liquidity tracking: 1) in March, the manufacturing PMI was 49.5%, down 0.7 percentage points from the previous month, and the prosperity level of the manufacturing industry increased slightly. Among them, the PMI of large / medium / small enterprises were 51.3% / 48.5% / 46.6% respectively, with a chain comparison of – 0.5% / – 2.9% / 1.5%. The operating pressure of large and medium-sized enterprises increased, and the small enterprises were slightly prosperous. In February 2022, the PPI index continued to fall, and the CPI index remained flat. The PPI fell by 0.3 percentage points to 8.80% year-on-year, and the CPI was flat to 0.9% year-on-year. Marginal easing of inflationary pressures. 2) In March, the one-year MLF interest rate remained unchanged at 2.85%, and the lpr1 one-year / five-year period was flat compared with the previous month, with 3.70% / 4.60% respectively. The market interest rate rose, and the yield of one-year / 10-year Treasury bonds in March rose 8.57bp/1.28bp to 2.13% / 2.79% compared with the previous month. 3) The credit data in February 2022 was lower than expected. The new RMB loans in a single month were 1.23 trillion yuan, an increase of 130 billion yuan less than that in the same period last year. The stock growth rate increased by 11.4% year-on-year, 0.1 percentage point lower than that in the previous month, and fell for seven consecutive months.
Risk tips: 1) the economic downturn leads to higher than expected pressure on the quality of industrial assets. 2) The decline in interest rates led to a narrower than expected industry interest margin. 3) The increase of cash flow pressure of real estate enterprises leads to the rise of credit risk.
