Review of the banking sector: the banking index fell 0.2% this week, but outperformed the Shanghai and Shenzhen 300 index by 0.79pct, still with relative returns. Individual stocks rose and fell, among which Chengdu (+ 5.9%), Changshu (+ 3.9%), Nanjing (+ 2.9%), Jiangsu (+ 2.6%) and Hangzhou (+ 1.9%) recorded better performance. Northbound capital reduced its position in bank shares by 3.396 billion yuan this week, but added Ping An (+ 378 million yuan), ICBC (+ 372 million yuan), Agricultural Bank of China (+ 316 million yuan), Bank of China (+ 182 million yuan), postal savings (+ 150 million yuan) and other targets.
The 1q operation situation of the banking industry is stable, and the "wide credit" is still on the way. On April 15, the State Information Office held a press conference on the operation and development of banking and insurance industry in the first quarter. The main information related to bank operation is as follows:
1) accelerated asset expansion: the expansion speed of the asset side has increased quarter on quarter, and the credit supply in key areas such as manufacturing and Pratt & Whitney microenterprises has increased. The "new citizen" credit is expected to be an important new growth point in the future;
2) downward Loan Pricing: the annualized interest rate of 1q newly issued enterprise loans decreased by 0.2pct compared with the beginning of the year. While the credit supply increased, the effective credit demand was relatively insufficient, which was the main factor driving the downward interest rate;
3) improvement of asset quality: at the end of 1q, the non-performing rate of the banking industry decreased 3bp quarter on quarter to 1.79%, and the non-performing rate has decreased quarterly since 2020. Meanwhile, the provision coverage rate recorded a high level of 199.5%;
4) encourage dynamic provision adjustment: the policy encourages large banks and other high-quality listed banks to gradually return the actual provision coverage to a reasonable level, which helps to improve the bank's risk tolerance, guide strict asset quality identification, increase the recognition of non-performing loans in high-risk areas, and relieve the pressure on subsequent asset quality;
5) continue to support and promote local governments to issue special bonds and stabilize the credit supply in weak qualified regions, so as to block the negative cycle of "finance entity".
The first quarterly report of listed banks was released, and the growth rate of revenue and profit increased month on month: at the weekend, Bank Of Nanjing Co.Ltd(601009) disclosed the first quarterly report of 2022, which showed as a whole: ① the growth rate of 1q22 revenue and profit increased quarter on quarter. Although 1q21 had a low base effect, it achieved such performance under the phased spread of China's epidemic, which fully reflected the regional advantages and the company's operating strength; ② Credit continued to increase at a high rate, and Nim's operation was under pressure. It promoted the growth of interest income by "supplementing price with volume"; ③ Non interest income increased significantly, and investment in the bond market promoted a significant year-on-year increase in net other non interest income; ④ The non-performing rate of 1q22 decreased by 1bp quarter on quarter to 0.9%, the asset quality continued to improve, the provision was strengthened to deal with the subsequent asset quality pressure, and the risk offset ability was enhanced.
Banking business outlook in the second quarter: the "steady growth" in the second quarter entered a critical period. In addition to the positive signals of banking operation and "wide credit" transmitted by the press conference of the State Information Office of the CBRC, a series of "steady growth" policies have also been intensively released recently. In terms of monetary policy, there is restraint in reducing interest rates and reserve requirements, but the requirements for stable credit supply are still strong. "Steady growth" is expected to further strengthen, so as to promote "steady investment". From the perspective of the international situation in China: geopolitical instability causes great imported inflation pressure; The periodic upside down of China US interest rate spread disturbs cross-border capital flows; The epidemic situation in China's economically developed provinces has caused a significant decline in the stability of the supply chain and industrial chain system, putting pressure on steady growth and price stability. From the perspective of bank operation, in the second quarter, ① the rapid growth of credit in developed provinces may be under pressure, and more measures are needed to stabilize credit supply; ② The narrowing pressure of net interest margin is greater than 1q, and the liability side needs to be supplemented by more control means to stabilize the net interest margin; ③ The potential problem of real estate loans "can be fully developed", and the short-term consumer credit risk of retail in epidemic affected areas may rise. We believe that the operation of 1q listed banks is generally stable, and the growth rate of sector revenue and profit is "slightly lower in the overall stability, and some are slightly differentiated". In the financial reporting quarter in April, the operation of listed banks can still release a stable signal. In the future, we will pay close attention to the overall situation of epidemic evolution and the resulting impact of uncertainty.
Investment logic of bank stocks: 1) recently, the real estate sector has continued to perform under the warm wind of policies, forming a resonance with bank stocks. The further introduction of the stable sales policy of real estate will also help to promote the recovery of 2q mortgage demand; 2) Next week, listed banks will successively enter the centralized release period of the first quarterly report. The quarterly report of Bank Of Nanjing Co.Ltd(601009) and the performance forecast of Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) 1q all show that the revenue and profit continue to improve from the high quarter on quarter. The performance of high-quality banks located in Jiangsu and Zhejiang is relatively more uncertain. Nanjing, Changshu, Jiangsu and Bank Of Hangzhou Co.Ltd(600926) . At the same time, we also continue to recommend the "head goose" of credit supply and the main line of big banks with obvious advantages on the liability side, with emphasis on Postal Savings Bank Of China Co.Ltd(601658) .
Risk warning: the economic growth rate is lower than expected; Real estate risk situation disturbance; Financial profit giving entities exceeded expectations.
