Yan Meizhi, head of financial industry research in Greater China of UBS, said at a media conference on the 13th that the profit growth of China’s major banks will be strong in 2021, but the profit growth is expected to slow down in 2022. However, the profit of large state-owned banks is expected to increase by about 6%.
Banking profits rebounded rapidly in 2021. Yan Meizhi pointed out that most state-owned banks have increased their profits by more than 10%, and many joint-stock banks and urban commercial banks have increased their profits by more than 20%, or even more than 30%.
According to the performance express released on Bank Of Jiangsu Co.Ltd(600919) 11, the net profit attributable to the parent bank in 2021 was 19.694 billion yuan (RMB, the same below), a year-on-year increase of 30.72%. In addition, the net profit attributable to the parent company of Industrial Bank Co.Ltd(601166) , Jiangsu Suzhou Rural Commercial Bank Co.Ltd(603323) , Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) increased by more than 20% year-on-year.
Yan Meizhi pointed out that in 2020, banks made substantial provisions to deal with the epidemic. This also led to a double-digit year-on-year decline in the profits of many banks. In 2021, bank profits rebounded sharply from 2020 with a low base.
However, she pointed out that it is difficult to have such a large growth rate this year, but the prospect of bank profits is still considerable. It is estimated that the profit growth of large state-owned banks will be about 6% in 2022. This is actually higher than the level in 2018 and 2019 before the epidemic, when the profit growth rate of state-owned banks was only about 2% – 3%. Other joint-stock banks and urban commercial banks are also expected to have double-digit profit growth according to their own conditions.
For the performance of banking stocks, Yan Meizhi said that last year, the banking index outperformed the market. Take the MSCI index of Morgan Stanley as an example. Last year, the MSCI China Index fell by 22%, but the MSCI Bank Of China Limited(601988) index rose by about 3%, and the bank stocks outperformed by about 25%.
In January this year, the MSCI bank index rose about 5%, outperforming expectations. Yan Meizhi believes that this is because the valuation of bank stocks is relatively low, which is favored by investors when the market risk is high. It is expected that bank stocks will perform relatively stably in the market fluctuation in the first quarter. After the second quarter, if the market rebounds, bank stocks may not perform as well as stocks in other industries.
