Performance of the banking sector: this week, the A-share banking index rose 2.9%, outperforming the Shanghai and Shenzhen 300 index by 5.25pct, showing a significant relative return compared with the gem index. The growth rate of the sector ranks 4 / 30 among all industries. The top three industries (+ 4.4%), real estate (+ 4.3%) and construction (+ 3.5%) are related to the real estate infrastructure industry chain. The trend of the banking sector since the beginning of the year confirms the judgment of our report "moderately optimistic about the performance of banking stocks in the first quarter" last week. We believe that the banking sector is expected to remain strong in the future:
1) the real estate risk is gradually mitigated, and the market pessimistic expectation is in the process of repair
At present, real estate financing is gradually restored, and strong policy intervention helps to block the active "lying flat" thinking of real estate enterprises. Weak qualified real estate enterprises are actively carrying out "self-help". In our previous report, we stressed that since 1q involves important time nodes such as migrant workers\' wage payment before the Spring Festival and local and national "two sessions", the time window for passive default of real estate enterprises is narrow. In addition, the main responsibility of local party and government for resolving major financial risks is consolidated. It is expected that some real estate enterprises 1q financing cash restructuring, market mergers and acquisitions, and public bonds will try their best to confirm due to the high cost of default. According to the data released by the China Banking and Insurance Regulatory Commission on January 6, real estate loans increased by 8.4% year-on-year at the end of November 21; Previously, the people's Bank of China disclosed that the year-on-year (+ 11.3%) and month on month (+ 1.1%) growth rate of housing mortgage loan balance at the end of November were 0.3pct higher than the corresponding growth rate at the end of October. It is expected that the development loan will still have a negative growth in November. In the future, further real estate stability maintenance policies may still be on the way. 1q retail mortgage loans are expected to increase year-on-year. The policy focuses on stabilizing real estate sales, restoring the sustainable operation ability of real estate enterprises and repairing the pessimistic expectations of the market. As a result, the pressure on the asset quality of housing loans on the bank's balance sheet will be released.
2) "stable growth" focuses on "stable investment". Stable investment needs "wide credit", and the market has expectations for "wide credit"
Recently, according to the data released by the China Banking and Insurance Regulatory Commission, the credit development points in 2021 mainly include manufacturing, high-tech industries, green loans, Pratt & Whitney microenterprises, etc. By the end of 2021, the year-on-year growth rates of CCB's green loan and Pratt & Whitney's small and micro balance were 45.7% and 31.6% respectively; China Everbright Bank Company Limited Co.Ltd(601818) the year-on-year growth rate of the balance of medium and long-term loans, inclusive loans and green loans in the manufacturing industry was 46%, 27% and 20% respectively. In December 2021, the performance of new credit enhancement loans in the banking industry is expected to be mediocre, and the demand for "enhancing the stability of total credit growth" is particularly urgent at the beginning of this year. It is expected that the focus of "stable credit" of banks in 1q and throughout the year in 2022 will mainly be real estate, infrastructure, manufacturing, green credit, inclusive microenterprises, etc. 1q stable economic growth requires effective and rapid investment, which will stimulate the credit demand on the investment chain. Although there is still insufficient effective demand at this stage, the market is still willing to look forward to "wide credit", which is the main reason for the good performance of real estate infrastructure chain stocks since the beginning of the year.
3) the preference of funds for undervalued sectors increased, and bank stocks generally performed well in the beginning of the year
As of January 7, Pb valuation was in the wind class I industry with a quantile of more than 80% in recent ten years, with weekly decline ranging from - 8.2% to - 3.6%; Banks, real estate and other sectors with low valuation recorded better absolute and relative returns, showed signs of rotation of funds, and increased preference for undervalued sectors. At present, the overall valuation of the banking sector is only 0.65 times Pb, at a historical low. In terms of the performance of the banking sector from 2011 to 2021, 1q banking sector has a good trend in most years; Especially in January, excluding 2020 affected by the epidemic, the winning rate of relative income recorded by the banking sector was as high as 90%.
Investment logic and suggestions: postal savings (+ 8.2%), Societe Generale (+ 7.1%), Chengdu (+ 6.8%), Jiangsu (+ 6.3%), China Construction Bank (+ 4.8%), etc. are among the top gainers this week. We are still relatively optimistic in the follow-up. 1q investment logic has three main lines: 1) rebound themes caused by the weakening of real estate risk suppression, such as Societe Generale, Ping An and China Merchants Bank; 2) The main line of sound operation of high-quality regional local banks, such as Chengdu, Jiangsu, Nanjing, Hangzhou, Ningbo, etc; 3) At the beginning of the year, the main line of "Touyan" bank with stable credit supply, such as postal savings and China Construction Bank.
Risk tip: the economic growth rate is lower than expected; Real estate risk situation disturbance.
