With the substantial increase in the net profit of several listed banks, the market popularity of the banking sector is growing. Under the dual influence of low valuation and steady growth of performance, market funds continued to buy, and the counter attack market of bank stocks showed “tiger power”.
According to the reporter of China business daily, the current valuation of bank stocks is at a historical low and there is limited room for decline. In addition, a number of listed banks have successively released their performance letters for 2021, and the performance growth of bank shares has exceeded the market expectations. At the same time, the risk resolution of the real estate industry has also alleviated the concerns of the market. Some “offensive and defensive” bank shares such as Bank Of Beijing Co.Ltd(601169) have gradually attracted institutional attention.
banking stocks counter attack
At the beginning of 2022, the A-share market began to decline. After breaking 3600 points, the Shanghai stock index continued to fluctuate, and the gem index hit the lowest point (3050 points) since the second half of 2021. The share prices of listed companies such as energy, lithium batteries and so on have been corrected, while the banking sector has played a role in protecting the market.
In only 9 trading days in 2022, the short-term rise of A-share banking sector reached 4.29%, second only to the real estate sector. Among them, Bank Of Chengdu Co.Ltd(601838) increased by more than 16%, Postal Savings Bank Of China Co.Ltd(601658) increased by more than 10%, and the share prices of the four major state-owned banks with a market value of nearly trillion also increased by more than 2.5%.
Why did bank stocks counter attack in early 2022? This may be affected by the superposition of multiple factors.
“Affected by the covid-19 pneumonia epidemic, the market is worried about the profitability and asset quality of banks, which is the fundamental reason why bank stocks do not rise in recent years.” A private equity investor believes that.
At present, a number of listed banks have successively announced the pre increase of performance, which has exceeded the market expectations. On January 5, 2022, Bank Of Chengdu Co.Ltd(601838) disclosed the first performance forecast of listed banks in 2021. It is expected that the net profit attributable to the parent company in 2021 will increase by 1.085 billion yuan to 1.507 billion yuan year-on-year, with a year-on-year increase of 18% ~ 25%; The net profit attributable to the parent company after deducting non profits will increase by 1.090 billion yuan to 1.512 billion yuan year-on-year, with a year-on-year increase of 18% ~ 25%.
On January 10, 2022, Industrial Bank Co.Ltd(601166) performance express showed that the bank realized an operating revenue of 221.236 billion yuan in 2021, a year-on-year increase of 8.91%; The net profit attributable to the shareholders of the parent company was 82.68 billion yuan, a year-on-year increase of 24.1%. Jiangsu Suzhou Rural Commercial Bank Co.Ltd(603323) disclosed that in 2021, the bank realized an operating revenue of 3.821 billion yuan, a year-on-year increase of 1.82%; The net profit attributable to the parent company was 1.148 billion yuan, a year-on-year increase of 20.72%.
On January 11, 2022, Bank Of Jiangsu Co.Ltd(600919) announced that the operating revenue in 2021 was 63.771 billion yuan, a year-on-year increase of 22.58%; The net profit attributable to shareholders of listed companies was 19.694 billion yuan, a year-on-year increase of 30.72%, leading the growth of net profit of listed banks. Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) performance express shows that in 2021, the bank realized an operating revenue of 7.653 billion yuan, a year-on-year increase of 16.27%; The net profit attributable to common shareholders of the company was RMB 2.184 billion, a year-on-year increase of 21.13%. China Citic Bank Corporation Limited(601998) the performance express shows that the operating revenue will reach 204.557 billion yuan in 2021, with a year-on-year increase of 5.05%; The total profit was 65.517 billion yuan, an increase of 13.24% over the previous year; The net profit attributable to shareholders was 55.641 billion yuan, a year-on-year increase of 13.60%.
On January 13, 2022, Ping An Bank Co.Ltd(000001) released a performance express, which showed that in 2021, the bank realized an operating revenue of 169.383 billion yuan, a year-on-year increase of 10.3%; The net profit was 36.336 billion yuan, a year-on-year increase of 25.6%.
In addition, the risk resolution of national policies for the real estate industry has also alleviated the market’s concerns about the quality of bank assets. The introduction of a series of policies such as real estate M & A has boosted market confidence. According to the data of China Banking and Insurance Regulatory Commission, by the end of November 2021, the non-performing rate of banking financial institutions was 1.89%, a decrease of 0.04 percentage points compared with the beginning of 2021, and the provision coverage rate was 192.9%, an increase of 10 percentage points compared with the beginning of 2021.
Zeng Gang, director of the national finance and development laboratory, said that the overall profitability of the banking industry may maintain rapid growth in 2021. In 2021, the covid-19 pneumonia epidemic was effectively controlled, driving the recovery of China’s economy, which laid a foundation for the improvement of the operating performance of listed banks.
layout valuation depression
“The valuation of bank stocks is low and there is limited room for decline. Stimulated by the performance, the willingness of funds to buy is stronger.” The above-mentioned private investors said that bank stocks, as one of the allocation of underlying assets, can avoid market fluctuations by increasing positions.
Data show that in the first week of the stock market in 2022, the net inflow of funds from the north to the A-share banking sector reached 3.96 billion yuan, ranking first among 31 industry sectors. The bank targets such as China Merchants Bank Co.Ltd(600036) , Industrial Bank Co.Ltd(601166) have been bought by foreign capital on a large scale for many consecutive days. As of January 12, 2022, 37 bank shares had obtained northbound capital positions, with a total number of 16.631 billion shares, an increase of 1.015 billion shares or 6.50% over 15.616 billion shares at the end of 2021. Among them, 21 bank shares were significantly increased by northbound funds, and the increased number of northbound funds exceeded 10 million shares.
According to the reporter, in the securities investment suggestions in 2022, many securities companies have given “over allocation” ratings to the banking sector, and their attention is more inclined to the stock targets with low valuation and good prospects. In terms of dividend yield, the dividend yield of Bank Of Communications Co.Ltd(601328) and Bank Of Beijing Co.Ltd(601169) banks exceeds 6%, which is much higher than the expected return of some low-risk financial management.
“For the stocks of listed banks with high dividend yield, the judgment of fundamentals and stock price trend will be more critical. If the fundamentals improve and the stock price trend decreases, the investment value can be shown. On the contrary, the fundamentals are deteriorating and consistent with the stock price trend, so the investment needs to be cautious.” The above private investors believe that.
Take Bank Of Beijing Co.Ltd(601169) as an example, as the “first brother” of the city commercial bank, the total assets of Bank Of Beijing Co.Ltd(601169) have exceeded 3 trillion yuan, but the price to book ratio of the bank in the A-share market is only 0.5, and the dividend return is more than 6%. The stock market performance is very different from that of Bank Of Ningbo Co.Ltd(002142) and Bank Of Nanjing Co.Ltd(601009) listed in the same period.
The stock market performance of Bank Of Beijing Co.Ltd(601169) is closely related to the fundamentals of bank performance, especially dragged down by the previous asset quality. However, after two years of clearing the bad stock, the fundamentals of Bank Of Beijing Co.Ltd(601169) have improved. Many securities companies have conducted in-depth research on banks and given investment suggestions of “both offensive and defensive”.
Gf Securities Co.Ltd(000776) said in the latest research report that since 2014, affected by China’s economic growth shift, supply side structural reform and risk exposure of many large enterprises in the operating region, Bank Of Beijing Co.Ltd(601169) asset quality has been under pressure, which has dragged down the performance release and valuation performance.
However, while accelerating the clearing of stock risks, the bank strictly controlled the quality of new assets, and continued to promote retail transformation and corporate adjustment to enhance profitability. The profitability and non-performing rate of the bank ushered in an inflection point in 2020. “Since 2021, it has improved quarter by quarter with strong momentum. The current valuation is at a historical low. There is an expected difference between the valuation and fundamentals, and the future valuation can be repaired.”
According to the report, Bank Of Beijing Co.Ltd(601169) has the largest number of institutional outlets among urban commercial banks, covering the core cities of the Yangtze River Delta, the Pearl River Delta, the Bohai rim and the Yangtze River economic belt. In the long-term operation process, a large number of high-quality corporate customers have been precipitated, and the scale of corporate loans exceeds trillion yuan, accounting for nearly 70% of the total loans. Meanwhile, in 2021, the bank clearly proposed to increase the contribution of retail revenue to 50% in five years, and create the second curve of retail business growth through technology leadership and data drive.
In terms of asset quality, Gf Securities Co.Ltd(000776) report mentioned that after adjustment and digestion in the past few years, Bank Of Beijing Co.Ltd(601169) stock non-performing exposure is relatively sufficient, and large risks are gradually cleared out. For the stock problem assets, the bank’s accumulated non-performing write off amount from 2018 to the first half of 2021 was close to 39.364 billion yuan, equivalent to 3.7% of the loans at the end of 2017. The disposal of individual enterprises’ large risks intensively exposed in 2019 is expected to be almost finished after two years, with limited impact on the subsequent asset quality.
The data show that the proportion of concerned loans in Bank Of Beijing Co.Ltd(601169) has dropped to less than 1%, and the new generation rate of non-performing loans has gradually dropped to a lower level.
The Boc International (China) Co.Ltd(601696) Research Report makes it clear that Bank Of Beijing Co.Ltd(601169) at present, the company’s valuation is close to the bottom of the industry, and the dividend yield has reached 6.77, close to the top of the industry, implying very pessimistic expectations. The Securities believes that the market concerns mainly stem from whether the quality problems of stock assets are cleared and whether the current situation of weak profitability can be improved. The securities judged that the stock problem of Bank Of Beijing Co.Ltd(601169) is gradually being solved, and the risk reconstruction is more cautious. In addition, the company’s operation and management have been gradually improved, and the business improvement has gradually played a role, which began to appear in 2022.
The Research Report of Boc International (China) Co.Ltd(601696) points out that Bank Of Beijing Co.Ltd(601169) has a good customer base, and the location advantages of the distribution of national core economic belt can not be copied. The regional advantages of Beijing are particularly prominent. Especially since 2020, the institutional business department has been established, and the advantages of Beijing may continue to be consolidated and strengthened. While resolving the stock problem, the bank’s management actively promoted the implementation of strategy and business improvement, institutional business, digital transformation, retail improvement and characteristic public relations. These strategies correspond to the organizational structure and are inclined in investment, manpower and incentive. Bank Of Beijing Co.Ltd(601169) clearly put forward the customer multiplication plan, expand and consolidate the customer base, and gradually stimulate the potential of location and customers, which is conducive to the adjustment of credit structure, the growth of deposits and the increase of medium income in the future, and will gradually improve the profitability of the company.
“Usually, the fluctuation range of bank stocks is relatively small. Many long-term holding bank stocks result in no loss or profit. However, in terms of dividend yield, the return of dividend yield of more than 5% is still considerable.” The aforementioned private investors believe that the logic of investment banks is relatively simple, and it is also good to explore some potential banks for value investment. From a cyclical point of view, bank stocks will not fall or rise all the time, but will show ups and downs. If we can make use of the stock price cycle, combined with high stock dividends, the annual yield of ordinary investors is also considerable.
