The banking sector suffered a sharp setback, showing a weakening situation. On April 18, banking stocks collectively fell at the opening, and 40 banks remained “green” until the closing, with the overall decline of the banking sector reaching 2.44%. In the view of analysts, the sharp decline of bank shares was mainly affected by the economic data in the first quarter and the RRR reduction. However, in the long run, the fundamentals and profits of the bank’s own operations will support the long-term steady rise of bank shares.
On the morning of April 18, the A-share banking sector fell collectively. China Merchants Bank Co.Ltd(600036) once led the decline by more than 8%, and Qilu Bank Co.Ltd(601665) and Bank of Lanzhou also fell by more than 6%. On the same day, the topic of “CMB’s share price plummeted” also rushed to the microblog hot search. For the reasons for the sharp decline in share price, China Merchants Bank Co.Ltd(600036) Investor Relations Department responded to the reporter of Beijing Business Daily that it was understanding the reasons for the decline in share price and had not yet mastered the situation. According to the announcement released later by the bank: China Merchants Bank Co.Ltd(600036) issued the notice of the 38th meeting of the 11th board of directors on April 18, held the meeting in the form of remote video teleconference on the same day, and agreed to remove Tian Huiyu from the posts of China Merchants Bank Co.Ltd(600036) president and director, with another appointment; Wang Liang, executive director, executive vice president, financial director and Secretary of the board of directors, presided over China Merchants Bank Co.Ltd(600036) work.
Until the closing on April 18, the overall decline of the banking sector was 2.44%, and the share prices of some banks rebounded. Among the 42 A-share listed banks, 40 were “floating green”, while only Bank Of Hangzhou Co.Ltd(600926) , China Zheshang Bank Co.Ltd(601916) and China Zheshang Bank Co.Ltd(601916) rose by 1.31% and 0.6% respectively, and the remaining 40 banks were still in a state of decline.
Among the 40 banks that fell, Qilu Bank Co.Ltd(601665) shares fell 8.54% to 5.89 yuan / share China Merchants Bank Co.Ltd(600036) decline narrowed to 7.35%; Bank of Lanzhou, Xiamen Bank Co.Ltd(601187) , Jiangyin rural commercial bank, Bank Of Qingdao Co.Ltd(002948) and other banks also fell by more than 4%.
For the reason why the share price of bank shares fell sharply on April 18, a market research analyst told the Beijing Business Daily that it was mainly due to the poor performance of economic data in the first quarter, the weakening of financial demand, the intensification of bank competition and the pressure on bank income. At the same time, the monetary and credit policy is expected to continue to be loose, the interest rate and price at the bank’s asset side will decline, while the RRR reduction is relatively small, the capital cost at the bank’s liability side will decline limited, and the interest rate spread may be narrowed, thus reducing profits.
On April 15, in order to support the development of the real economy and promote the steady decline of comprehensive financing costs, the people’s Bank of China decided to reduce the deposit reserve ratio of financial institutions by 0.25 percentage points on April 25 (excluding financial institutions that have implemented the deposit reserve ratio of 5%). In order to increase the support for small and micro enterprises and “agriculture, rural areas and farmers”, for urban commercial banks without inter provincial operation and agricultural commercial banks with deposit reserve ratio higher than 5%, an additional 0.25 percentage point will be reduced on the basis of reducing the deposit reserve ratio by 0.25 percentage point. After the reduction, the weighted average deposit reserve ratio of financial institutions was 8.1%.
“With the implementation of the RRR reduction policy, the rising range of bank stocks in the early stage has dropped to a certain extent, but the fundamentals and profits of the bank’s own operation will still support the long-term steady rise of bank stocks.” Wang Hongying, President of China (Hong Kong) Financial Derivatives Investment Research Institute, said that since this year, among the blue chip blue chip stocks in the whole market, bank stocks have performed very well, and the rise of some banks has even exceeded the average level of the Shanghai Stock Exchange Index in the same period, indicating that the long-term investment value of commercial banks is generally recognized by investors, and it is only a technical decline at this stage, With the adjustment and stability in recent days, it still has investment value.
According to data statistics, as of April 18, 27 of the 42 listed banks in A-share market have published their annual reports for 2021. The net profit attributable to parent companies of these 27 banks has achieved positive growth, of which 23 have increased by more than 10% year-on-year. While the performance is improving, the pressure of “breaking the net” of bank stocks is still on. As of the closing on April 18, among the 42 listed banks with a shares, 32 banks have fallen below the price to book ratio, accounting for nearly 80%.
Referring to the trend and valuation trend of bank stocks, China Everbright Bank Company Limited Co.Ltd(601818) financial market macro researcher Zhou Maohua believes that from the macroeconomic data of the first quarter, China’s economy started smoothly. With the weakening of the impact of the epidemic, China’s multi sectoral policies coordinated, the rescue and enterprise assistance policies made precise efforts, stabilized the supply chain of the industrial chain, unblocked the internal circulation, and the economic outlook was optimistic. In addition, the stock market valuation was at a low level both horizontally and vertically, The downside space of the market is limited. In terms of the banking sector, from the perspective of China’s fundamentals and policies, it is beneficial to the bank’s profitability and asset quality. In addition, the bank’s high dividend and undervalued value do not change the valuation repair trend due to short-term fluctuations.
Combined with the current policy and market conditions, is the bank stock still worth getting on the bus? How to invest? Wang Hongying said that the main trend of bank stocks in the future is still rising steadily. From the perspective of investment, the countercyclical characteristics of bank stocks will become more and more obvious under the background of the adjustment of the whole economic cycle. At present, the stock prices and net assets of some banks are in a relatively low valuation position. It is suggested that investors can choose some large banks or characteristic small and medium-sized listed banks to invest. In terms of trading strategy, it is not recommended that investors pursue the rise at the level of about 20% of the general rise of bank stocks. It is a good trading strategy to gradually build positions on bargain hunting.
“Although the valuation of the banking sector is low, the future performance of banks is under pressure and risk accumulation may lead to small overall performance space. The state of low valuation may continue. Investors need to treat the banking sector carefully. At the same time, they need to pay attention to the banks with more stable performance and excellent risk indicators in the banking sector. In addition, they can also pay appropriate attention to the small and medium-sized banks with concentrated innovative business and excellent performance.” The aforementioned market research analysts suggested.
