Ping An View:
Performance summary: 41 listed banks completed the disclosure of the quarterly report of January 22. In the first quarter of 2022, the net profit of listed banks increased by 8.7% year-on-year, and the growth rate slowed down by 3.9pct compared with 12.6% in 2021. In terms of individual stocks, among the large and medium-sized banks, Ping An (YoY + 26.8%), postal savings (YoY + 17.8%) and Societe Generale (YoY + 15.6%) grew rapidly. Among the urban commercial banks, Hangzhou (YoY + 31.4%), Chengdu (YoY + 28.8%) and Jiangsu (YoY + 26.0%).
Performance attribution: We conducted attribution analysis on the growth rate of net profit of listed banks in the first quarter of the 22nd year. From the decomposition of various factors driven by the growth rate of net profit, the main positive contributing factor is provision. In the first quarter of 2022, the net profit contributed by the provision of listed banks increased by 6.1 percentage points. Under the stable operation of asset quality, the normalization of the provision is still the most important factor to promote the significant increase of the profit growth of listed banks. Interest rate spread is still the main negative factor. In the first quarter of 2022, the interest margin of listed banks made a negative contribution to earnings by 4.1 percentage points, which was mainly affected by the decline of asset side pricing in the past 21 years. The contribution of scale expansion and medium income has declined. In the first quarter of 2022, the scale contributed 4.8 percentage points to the profit (vs 21 + 5.6%). The middle income contributed 1.1 percentage points to the profit (vs21 + 2.4%). Under the disturbance of investment income, the contribution of other non interest groups decreased significantly, with a negative contribution of 0.2 percentage points to profits in the first quarter of 2022 (vs21 + 4.9%).
Scale expansion accelerated, and deposit growth continued to pick up. From the perspective of scale indicators, the overall asset scale growth rate of listed banks at the end of 22q1 was higher than that of 21q4, and the total assets increased by 8.7% (vs + 7.9%, 21q4). Among them, the scale growth rate of large banks and joint-stock banks was the most obvious, with the growth rate increased by 0.8pct/1.0pct to 8.5% / 8.1% respectively compared with 21q4. At the end of 22q1, the loan growth rate of listed banks increased by 10.9% (vs + 11.3%, 21q4) year-on-year. The growth rate slowed down slightly, but remained at a high level, reflecting the effectiveness of the policy in stabilizing credit. Looking forward to 2022, the downward pressure on China’s economy still exists, and the uncertainty of the epidemic situation is rising. We judge that the policy will continue to make steady growth, and banks are expected to usher in a relatively loose and mild regulatory environment. The deposit growth rate further increased. At the end of 22q1, the deposit growth rate increased by 1.2pct to 8.7% compared with 21q4, and the growth rate of various types of institutions rebounded. Among them, the deposit growth rate of joint-stock banks and urban commercial banks increased significantly compared with 21q4, with a year-on-year growth rate of 2.9pct/2.8pct to 9.9% / 13.4% respectively.
The narrowing of interest rate spread is dragged down by the asset side and the cost of liability side is reduced. According to the end of the initial period of listed banks, we calculated that the single quarter annualized net interest margin in the first quarter of 22 was 2.33%, which was 6BP narrower than that in the fourth quarter of 21. It was still mainly dragged down by the decline of the return on the asset side, and the improvement on the liability side was small. Specifically, we estimate that the return on interest bearing assets of 22q1 decreased by 10bp to 4.40% compared with 21q4, and remained in the downward channel; The debt side continued to improve slightly, and the cost ratio of interest bearing debt in 22q1 decreased 3bp to 1.88% compared with 21q4. Individually, under the situation that most bank interest spreads continue to narrow, the interest spreads of Sunong (+ 33bp), Ningbo (+ 12bp) and Jiangsu (+ 9bp) continue to perform well.
The growth rate of medium income slowed down, and some businesses were under pressure under the downturn of capital market. In the first quarter of 2012, the net income of handling charges and commissions of listed banks increased by 3.5% year-on-year, down 2.8pct from the annual growth rate of 21 years. We judge that the slowdown is mainly related to the pressure on agency and financial management businesses under the influence of the downturn of capital market in the first quarter. In terms of classification, the growth rate of joint-stock banks and rural commercial banks has increased, with the middle income of 22q1 increasing by 5.4% and 31.8% respectively year-on-year, while that of large banks and urban commercial banks has decreased to 1.4% and 3.6% respectively year-on-year. In terms of revenue structure, the proportion of handling charges of listed banks in revenue decreased slightly compared with the same period last year. The proportion of revenue of 22q1 listed banks in revenue decreased by 0.3pct to 17.0% compared with 21q1. From the perspective of institutional types, the proportion of revenue of joint-stock banks is still the highest, of which China Merchants Bank, Societe Generale reached 31% and 22%, and Everbright and Ping An are close to 20%.
The ratio of cost to income decreased, and the digital transformation made steady progress. In the first quarter of 2022, the listed banking business and management fees increased by 7.2% (vs + 13.5%, 21a) year-on-year. The speed of fee investment slowed down, and the cost income decreased slightly compared with the whole, down 5.3pct to 23.9% compared with 21 years. In the long run, we expect the steady progress of digital transformation to promote the continuous improvement of the operation efficiency of the industry. Individually, Zhengzhou (15.4%) has the lowest cost income ratio in the industry, followed by ICBC (17.4%), Shanghai (18.0%), CCB (18.3%) and Jiangsu (20.5%).
The asset quality is stable and improving, and the provision level is stable as a whole. In the first quarter of 2022, the non-performing rate of listed banks decreased by 4bp to 1.31% compared with that at the end of 2021, and the asset quality performance continued to improve, which was lower than the pre epidemic level. At the same time, the risk offset capacity continued to be consolidated, the provision coverage level increased by 4% to 241% month on month compared with 21q4, and the provision loan ratio decreased by 4bp to 3.14%. In terms of forward-looking indicators, we observed that the concern rate of most listed banks decreased slightly after rising in the fourth quarter of last year. We judge that the risks of individual enterprises affected by the macroeconomic downturn in the first quarter have been gradually resolved. However, the change trend of the subsequent asset quality of the industry is still worth observing. We believe that under the bottom line thinking of supervision, the probability of large-scale credit risk release is small. The superposition of the overall bad burden of the industry has been relatively fully resolved in the past 3-4 years. It is expected that the generation pressure of bad assets of banks is controllable, and the performance of asset quality is expected to remain stable.
Investment suggestion: Policy correction is expected to improve and continue to be optimistic about valuation repair. Looking forward to the second quarter of 2022, with the force of steady growth policy and the correction of real estate policy, the industry will still be in the channel of negative expectation improvement. At present, the static valuation level of the sector is only 0.61x, which is still at an absolute low in history, and the margin of safety is sufficient. We are still optimistic about the valuation repair opportunities of the banking sector. Individual stocks recommend high-quality regional banks represented by Bank Of Chengdu Co.Ltd(601838) , Bank Of Ningbo Co.Ltd(002142) , Bank Of Jiangsu Co.Ltd(600919) with obvious marginal improvement in fundamentals and better growth than peers.
Risk tips: 1) macroeconomic downturn leads to higher than expected pressure on asset quality of the industry. 2) The decline in interest rates led to a narrower than expected industry interest margin. 3) The increase of cash flow pressure of real estate enterprises leads to the rise of credit risk.
