On April 19, the central bank and the China Banking and Insurance Regulatory Commission jointly held a symposium on financial support for the real economy, paid close attention to the implementation of various recent financial policies, and increased financial support for epidemic prevention and control and economic and social development.
Regulators take more measures to reduce bank costs, and financial support for the real economy has a neutral impact on banks. In the context of the great impact of the current round of epidemic counterattack on small and micro enterprises, regulators stressed that financial institutions “should introduce supporting measures to support small and micro distressed subjects in terms of credit resource allocation, internal assessment and transfer pricing”. This is not to allow commercial banks to unilaterally transfer profits to the real economy, but to guide banks to transfer profits to the real economy to alleviate the economic dilemma and ensure the profitability of commercial banks themselves. On the one hand, the national Standing Committee proposed to “encourage large banks with high provision level to reduce the provision rate in an orderly manner”, which can reduce the pressure of bank credit cost, release some profits and buffer the negative impact of profit giving small and micro enterprises on their performance; On the other hand, the central bank decided to reduce the deposit reserve ratio of financial institutions by 0.25 percentage points on April 25, which can effectively alleviate the cost pressure on the liability side of banks. In addition to supervision, 18 national banks and 5 AMCs participated in the meeting, as the main body of credit easing and risk mitigation respectively, focusing on the current round of high-quality credit easing.
The marginal easing of real estate credit policy is conducive to the improvement of bank asset quality. Affected by the continued weakening of the expectation of rising house prices and the strong uncertainty of residents’ income under the influence of the epidemic, residents’ willingness to buy houses is low, and the growth rate of real estate sales and investment continues to decline. According to the data of the National Bureau of statistics, the cumulative year-on-year growth rates of commercial housing sales and real estate development investment in March 2022 were – 22.7% and 0.7% respectively, with a significant decrease of 3.4pct and 3PCT respectively. In March, the new medium – and long-term loans to residents decreased by 250.4 billion yuan year-on-year, which also reflected the weak demand for residential mortgage loans under the downturn of sales. The meeting stressed that banks should “implement differentiated housing credit policies according to urban policies to better meet the reasonable housing needs of home buyers”, “distinguish project risks from enterprise group risks, and do not blindly withdraw, cut off and suppress loans”. The easing of the margin of real estate credit policy is good for real estate enterprises, alleviate the pressure of cash flow, promote the real estate industry to enter the stage of virtuous circle development as soon as possible, and also contribute to the improvement of bank asset quality.
LPR remains unchanged and structural credit is on the way. On April 20, the 1-year LPR and 5-year LPR remained unchanged, the expectation of interest rate reduction failed, and the improvement of debt cost was not enough to drive the LPR down. In addition, the symposium proposed to “give full play to the effectiveness of a number of structural monetary policy tools”. It is expected that inclusive small and micro enterprises, scientific and technological innovation and green economy will still be the key support direction, and banks with first mover advantages in this field are expected to enjoy the policy dividend to the greatest extent.
Financial support for the real economy is not a unilateral transfer of profits by banks. The release of long-term low-cost funds and the failure of interest rate reduction are good for the profitability of banks. At the same time, the marginal loosening of real estate credit policy is conducive to the release of credit risk by commercial banks. In addition, structural credit is on the way. It is expected that inclusive small and micro enterprises, scientific and technological innovation and green economy will still be the key support directions. Therefore, we suggest to actively pay attention to joint-stock banks and regional banks with first mover advantages in this field.
Risk warning: macroeconomic growth rate is down; The epidemic situation repeatedly exceeded expectations; The real estate policy is not as expected.
