Key investment points
On April 13, the executive meeting of the State Council decided to encourage large banks with high provision level to reduce the provision rate in an orderly manner in view of the changes in the current situation, make timely use of monetary policy tools such as RRR reduction, further strengthen financial support for the real economy, especially industries seriously affected by the epidemic, small, medium-sized and micro enterprises and individual industrial and commercial households, make reasonable profits to the real economy and reduce comprehensive financing costs.
(1) the total credit scale of the six large commercial banks is 8.5 trillion yuan, and the provision coverage rate is high. According to the annual report of 2021, six large commercial banks have adequate provisions for loan losses. In terms of provision coverage, the minimum is Bank Of Communications Co.Ltd(601328) 166.5%, the maximum is Postal Savings Bank Of China Co.Ltd(601658) , 418.61%, which is far higher than the 150% requirement of the CBRC; The total loan impairment provision of the six banks was 27513 billion yuan, of which the lowest was Bank Of Communications Co.Ltd(601328) 161162 billion yuan and the highest was Agricultural Bank Of China Limited(601288) 736.687 billion yuan.
(2) the high overall non-performing rate limits the room for reduction of provision coverage. The total scale of non-performing loans of the six large banks was 1163555 billion yuan, of which the lowest was Postal Savings Bank Of China Co.Ltd(601658) 52.685 billion yuan and the highest was Industrial And Commercial Bank Of China Limited(601398) 293.429 billion yuan. The average non-performing rate of the six large banks is 1.36%, the lowest is Postal Savings Bank Of China Co.Ltd(601658) 082%, and the highest is Bank Of Communications Co.Ltd(601328) 148%. Compared with the average non-performing rate of A-share listed banks in 2021, the average non-performing rate was 1.23%. Only Postal Savings Bank Of China Co.Ltd(601658) one was lower than the average level, and the other five were significantly higher than the industry average.
(3) it is estimated that the provision will be reduced, and the cumulative amount of incremental credit that can be released will be 200 ~ 500 billion. We have made a simple static calculation according to three situations. If the six large commercial banks reduce the provision coverage by an average of 20 percentage points, they can release 232685 billion yuan of provision funds; If the provision coverage is reduced by 50 percentage points on average, 578364 billion yuan can be released. In more extreme cases, if the provision coverage rate is reduced to 150% of the regulatory requirements, RMB 1006038 billion can be released. From the perspective of reducing the provision coverage, the incremental credit scale provided by the six large banks is about 200 ~ 500 billion yuan, mainly considering that the large banks are listed companies, it is necessary to maintain a high provision coverage, which can improve the health of financial statements and investor confidence, maintain the stability of market and stock price, and leave enough space for the disposal of credit assets caused by the adjustment shock of major industries in the period of economic transformation.
(4) the expected rise of reserve requirement reduction of monetary policy. The national standing committee meeting proposed “timely use of reserve requirement reduction and other monetary policy tools”, which shows that the senior management is still confident in the judgment of the economic situation. It can boost the fundamentals by increasing the credit supply, and provide appropriate credit support conditions for local government led projects. The central bank is expected to carry out a general RRR reduction of 0.5 percentage points in the near future, which can release about 1.1 trillion bank funds.
Strategic suggestion: the main content of the announcement of the national regular meeting shows that the senior management is still confident in the judgment of the economic situation. The basic judgment is to boost the fundamentals by increasing credit supply. Specifically, we believe that there are two aspects worthy of attention: (1) from the perspective of reducing the provision coverage, the incremental credit scale provided by the six large banks is about 200500 billion yuan; (2) The central bank should timely use the RRR reduction and other monetary policy tools. It is expected that the central bank will carry out a general RRR reduction of 0.5 percentage points in the near future, which can release about 1.1 trillion bank funds.
Risk warning: the fiscal underpinning policy exceeded expectations and the external environment improved
