Main points
Performance overview: improved revenue and differentiated performance
In the disclosed annual report, listed banks achieved a total revenue of + 8.1% year-on-year in 2021, a continuous increase of 0.4pct compared with the first three quarters Net interest income, net handling charges and other non interest income increased by + 4.8% / + 8.7% / + 31.8% year-on-year respectively, which was slightly improved compared with the previous three quarters. On the one hand, the interest margin of most banks stabilized and the expansion of asset statement was basically stable in the fourth quarter. With the strong support of handling charge income driven by big wealth business, the core profit is still improving. On the other hand, non Commission transaction income such as investment income and changes in fair value maintained a high growth throughout the year. Driven by the improvement of revenue and less provision for impairment, the net profit attributable to the parent company was + 13.1% year-on-year, which continued to be about 5pct higher than the growth rate of revenue, which was significantly higher than that in 2020. The provision for impairment continued to feed the release of profits against the cycle, but the growth rate decreased by 0.7pct month on month.
Attribution of profit growth: scale, provision, net handling fee and other non interest income are contributing 5.8pct/9.7pct/2.4pct/6.0pct respectively, and the narrowing of interest margin and rising cost drag down 5.6pct/4.5pct respectively, that is, the performance is released through compensation by volume + less provision for impairment throughout the year. From the marginal point of view, the impact of scale, interest margin and handling charges on profits during the year is basically stable. The upward growth of performance since the second quarter is mainly driven by impairment provision and other non interest positive, and the greater change of Q4 is the negative drag of cost.
2021 annual report features:
Feature 1: the layout of wealth management is accelerated, and the handling fee income is steadily supported. The steady growth of middle income is the main driving factor for the upward revenue of the whole year. As the strategic focus and business line of most banks in 2021, wealth management contributes to the rapid growth of middle income, except for the rapid growth of customer base and business volume, the growth of retail customers and AUM scale is in the range of 10% – 20%.
Feature 2: Retail + bill impulse was added in the second half of the year, and the growth rate of industry table expansion driven by large banks recovered at the end of the year. Total assets increased by 7.7% year-on-year, 0.8pct higher than Q3, and the growth rate of table expansion increased steadily, mainly driven by large banks. The growth rate of loan scale was 11.5%, the asset manipulation continued to tilt towards loans, and the loan delivery in the second half of the year was dominated by retail loans and bill impulse. The total amount of corporate, retail loans and bills in the whole year was + 9% / 11.3% / 15.6% respectively. In the second half of the year, the demand for corporate credit was not strong, and the total scale of corporate loans decreased. At the same time, the bill increased significantly, and the retail delivery was stable, driving the proportion of total loans to increase by 0.4pct The annual growth rate of deposits was 7.4%, slower than the 10% trend in 2020, but remained stable during the year.
Feature 3: the interest rate spread stabilized during the year, with outstanding performance of large banks and urban commercial banks. The annual net interest margin of 13 banks was flat or higher than the level of the interim report or the third quarterly report, and there were signs of stabilizing the interest margin during the year. The annualized net interest margin 2021a calculated according to the average of the end balance at the beginning of the period was 1.99%, which was only 1bp lower than that in the first half of the year (6BP lower than 2020A in the first half of the year). The decline of interest margin in the second half of the year was significantly slowed down, thanks to the optimization at both ends of asset negative.
Feature 4: the credit cost of bad stock clearing has dropped, and the structural risk has been disturbed. The apparent indicators of asset quality are in the improvement channel as a whole: the year-end non-performing rate is 1.34%, and the month on month Q3 is further reduced by 5bp; The proportion of attention category accounted for 1.74%. Driven by large banks and rural commercial banks, the proportion of attention category decreased by 4bp in the medium term, but the proportion of joint-stock banks and urban commercial banks decreased first and then increased during the year, which is expected to be affected by real estate risk or regional credit risk exposure; The provision coverage rate rises naturally; The structural risk is reflected in the obvious rise of non-performing loans of some banks to the public real estate industry due to the default events of individual real estate enterprises and the deterioration of asset quality.
I. quarterly Trend Outlook:
Trend 1: the revenue is correct, the marginal contribution factor is weakening, and the credit cost will still ensure the release of profits. Under the condition that the loan increment remains stable and the growth rate drops slightly, the superimposed interest margin is expected to continue to decline year-on-year, and there is a certain pressure on the interest collection business; The trading non interest income base is low before and high after, and the positive contribution to revenue is expected to be weakened; In the first quarter, the capital market was relatively weak, or it may affect the income performance of wealth related to agency sales of financial products. Revenue growth is expected to decline month on month. The drag of cost expenditure at the beginning of the year is expected to weaken, but due to the disturbance of structural risk, the marginal strength of credit impairment provision is expected to strengthen, and the overall profit growth rate will still narrow the margin.
Trend 2: the problem of insufficient effective demand is prominent, and the policy underpinning is expected that the credit increment is stable. 1. According to the financial data of February, the total amount of loans still increased year-on-year after the impulse at the beginning of the year, which is the main contribution of social finance, but the structure is weak. The support for the stable expansion of credit in the future mainly comes from the bottom expectation of stable growth policy. Observing the leading indicators, the bill interest rate showed signs of bottoming out and stabilizing in March, and the banker’s credit approval and demand index also rebounded month on month.
Trend 3: the supply and demand structure is weak, the interest margin is under pressure, and the deposit pricing reform forms a certain hedge. The interest rate spread in 2022 will continue to decline year-on-year. The pressure comes from the impact of the epidemic. Under the downward pressure of the economy, wide money + wide credit is the main line of phased monetary policy, affecting the yield of new loans and repriced assets; Insufficient effective demand for credit affects the increase range. Part of the hedging comes from the self financing debt side. Under the reform of deposit pricing mechanism, repricing helps to continue the upward pressure on hedging costs.
Investment advice: optimistic about the performance of deterministic stocks and high dividend yield stocks. From the perspective of investment, the sector currently corresponds to only 0.65 times of static Pb, which has fully reflected the pessimistic expectations from the macro and micro levels. Since the fourth quarter of last year, regulatory efforts have been made to stabilize growth and expectations, as well as the improvement of the real estate policy environment, the improvement of credit costs, the overall valuation of the sector has been repaired, and a certain relative income has been obtained. At present, on the one hand, the expected fulfillment of the bank’s annual report in the near future supports the stabilization of the valuation level; On the other hand, the current dividend yield of the sector is at the highest level in history, and the investment cost performance is relatively high on the basis of relatively uncertain performance. We maintain the “recommended” rating of the sector, and continue to recommend stock banks with excellent wealth strategy and high-quality and high-growth urban and rural commercial banks in key regions at the individual stock level: China Merchants, Ping An, Societe Generale, Chengdu, Hangzhou, Ningbo, Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) etc; And suggest paying attention to big banks with high dividend yield.
Risk tips
1) the downward pressure on the economy continues to increase, and the credit cost has increased significantly; 2) The repair of credit demand is less than expected, affecting the increment of bank scale; 3) The operation differentiation of small and medium-sized banks and the major operation risks of individual banks.
