Core view
Highlights Review & focus next week – important news last week: 1) the disclosure of annual reports of several listed banks shows that the fundamentals of the industry are still stable. As of April 1, a total of 23 listed banks had issued annual reports for 21 years. From the perspective of profit performance, the profit growth rate of listed banks in the fourth quarter continued to maintain a high level. In the whole year of 21 years, the net profit attributable to the parent increased by 13.2% (vs14.0%, 21q1-3). In terms of individual performance, Zhangjiagang (30.3%), Ping An (25.6%) and Societe Generale (24.1%) were the top performers in the performance growth of 2021 annual report. 2) The monetary policy committee of the central bank held its regular meeting in the first quarter. We will continue to emphasize increasing countercyclical and cross cyclical regulation, maintaining reasonable and sufficient liquidity, enhancing the stability of the growth of total credit, and add the expressions of “further dredge the transmission mechanism of monetary policy” and “strive to stabilize the cost of bank liabilities”. 3) The central bank issued a questionnaire survey report on bankers in the first quarter. The overall demand index for 22q1 loans was 72.3%, up 4.6 percentage points month on month. In addition, affected by the loose monetary policy, bankers’ perception of monetary policy has also increased, and there are still loose expectations in the future. Announcement of important companies: Xiamen Bank Co.Ltd(601187) launched a plan to stabilize the stock price, and Jiangsu Zijin Rural Commercial Bank Co.Ltd(601860) redeemed 300 million yuan of tier 2 capital bonds in full. Next week’s focus: on Friday Bank Of Ningbo Co.Ltd(002142) released the 2021 annual report.
Market and valuation review – the banking sector performed well last week. (1) In the last week, the Shenwan bank index rose by 5.18%, while the CSI 300 index rose by 2.43% in the same period. The banking sector outperformed the CSI 300 index by 274bps, ranking sixth among the 31 Shenwan level industries; (2) In the sub sectors, the market of urban commercial banks and rural commercial banks showed that the index rose 6.98% / 7.35% respectively, outperforming the Shanghai and Shenzhen 300 index by 4.55% and 4.91% respectively; (3) Last week, China CITIC Bank‘s top shares rose by 14.91% and the bank’s top shares rose by 20.47%. Bank stock valuations remain low. At the end of last week, the overall Pb of the banking sector was 0.61 times and the CSI 300 component stocks were 1.48 times. From the perspective of the deviation degree of the long-term trend, the valuation deviation degree of the banking sector relative to the CSI 300 component stocks was 91% of the historical quantile since 2013, and the sector was deeply undervalued.
Interest rate and exchange rate trend – the overall capital interest rate fell last week. The 7-day reverse repo rate in the inter-bank market decreased by 42bps to 1.79%, and the overnight Shibor rate decreased by 69bps to 1.31%. Last week, the central bank did not conduct MLF operation, and a total of 430 billion net investment was realized in the open market. In terms of exchange rate, the US dollar against RMB (CFETS) closed at 6.362 last weekend, down 35 points from the previous weekend; The US dollar closed at 6.3678 against offshore RMB, down 159 points from the previous weekend; The FOB / RMB spread increased by 124 points to – 58 points.
Investment proposal and investment object
Combined with the annual reports of 23 listed banks that have been released, the business performance of the industry continues to maintain a stable and positive trend, the profit growth rate remains high, and the asset quality performance is stable. At present, the static Pb valuation level of the sector is only 0.64x, at a historical low, which fully reflects the negative expectations of the industry under the downward pressure of the epidemic and the economy. The national standing committee meeting this week stressed the need to put steady growth in a more prominent position and keep the economic growth target unchanged. It can be predicted that there will be supportive policies, which are expected to continue to make efforts to improve economic expectations and provide effective support for the fundamental operation of banks. It is suggested to pay attention to the valuation repair opportunities brought by the “correction” of overly pessimistic market expectations and continue to maintain the “optimistic” rating of the industry.
In terms of individual stocks, it is suggested to pay attention to: 1) value targets with excellent historical profitability and leading asset quality represented by China Merchants Bank Co.Ltd(600036) ( China Merchants Bank Co.Ltd(600036) , Unrated) and Bank Of Ningbo Co.Ltd(002142) ( Bank Of Ningbo Co.Ltd(002142) , Unrated); 2) Undervalued targets represented by Bank Of Communications Co.Ltd(601328) ( Bank Of Communications Co.Ltd(601328) , Unrated), Industrial Bank Co.Ltd(601166) ( Industrial Bank Co.Ltd(601166) , Unrated), Postal Savings Bank Of China Co.Ltd(601658) ( Postal Savings Bank Of China Co.Ltd(601658) , Unrated); 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 duration and coverage of the epidemic exceeded expectations.
