Main points:
Performance overview: the growth rate of revenue is lower than that in 21 years, and the differentiation of different banks is becoming stronger
In Q1, 38 listed banks achieved a year-on-year growth rate of 5.6% / 3.4% / 8.6% in revenue, PPOP and net profit attributable to parent company. The main reasons for the decline of revenue potential are as follows: 1) affected by the fluctuation of capital market in the first quarter, it is difficult to delay the high growth trend of bank wealth related businesses last year; 2) Affected by the change of market interest rate and the change of base effect, the marginal growth rate of other non interest income contribution fell; 3) Although the growth margin of the industry’s overall net interest income rebounded, it was mainly driven by large banks.
Structurally, big banks benefited from the advantages of customer base, with strong credit supply at the beginning of the year, relatively low proportion of medium income, and upward core profit under the stability of volume increase and price; However, benefiting from the advantages of regional economic development and resource endowment, some small and medium-sized banks have continued to have high growth.
Attribution of profit growth: scale, provision, net handling fee and other non interest income contributed 5pct / 5.8pct/1.4pct/2.4pct respectively, and the narrowing of interest margin and rising cost dragged down 3.8pct/0.8pct respectively. Compensation by volume and less provision for impairment are still the main positive contributing factors to profit growth in the first quarter. On the margin, the positive contribution of scale is basically stable, the decline of interest margin converges, some banks stabilize and recover, the negative drag on profits narrows, and the degree of back feeding on performance decreases with the recovery of impairment provision.
Characteristics and Prospect of 2022 first quarter report:
1) Q1 wealth is difficult to sustain and increase, but it is still the engine of medium and long-term development. Since the beginning of the year, due to the fluctuation of the capital market, the issuance of the fund market has been cold, and the bank financial management with net worth transformation has also broken the net under the influence of the market. The fluctuation of product income and sales volume has an impact on the wealth business. However, in the medium and long term, wealth management transformation, as the consensus of many commercial banks in China, along with the improvement of product system, the improvement of channel sales capacity and the continuous consolidation of retail customer base, will still be the main path for banks to build the second growth curve.
2) Q1 credit “made a good start” and the proportion of public investment increased. Total assets were + 8.7% year-on-year, an increase of 0.8pct over the end of the previous year, and loans were + 11% year-on-year. The high increase in credit volume at the beginning of the year led to the acceleration of table expansion. Structurally, major banks are the first to benefit from the structural advantages of customer base and sufficient project reserves. However, some high-quality urban rural commercial banks in Jiangsu and Zhejiang have also achieved a scale growth rate of more than 20% relying on their strong asset acquisition ability. Retail loans were restrained in the first quarter, and the investment was weaker than seasonal. 88% of the net increase of 22q1 loans was invested in the public, with a year-on-year increase of more than 16pct. The support for the subsequent stable expansion of credit still comes from the bottom of the steady growth policy.
3) the supply and demand structure is weak, asset pricing is under pressure, and the expected interest margin will narrow slightly during the year. The net interest margin in the first quarter continued to drop year-on-year, which was also the main drag factor on the performance, with the impact of negative assets. With the subsequent entity financing needs not been repaired, it is difficult to improve the asset side pricing, and the implementation of RRR reduction + the reduction and increase of deposit self-discipline mechanism will help to alleviate the cost pressure. The interest rate spread is expected to narrow slightly during the year, and the drag on performance is expected to weaken with the reduction of the base.
4) the clearing of bad stock and high provision rate ensure the certainty of performance. In the first quarter, the non-performing rate fell by 2bp month on month, and the asset quality of various types of banks continued to improve; Structural risks continue to focus on the real estate industry, which is still in the stage of risk release, but the easing of policies helps to stabilize systemic risks. The provision for impairment losses returned to normal, the provision rate naturally rose to 240.4%, and the risk offset ability was further enhanced.
Investment suggestion: policy efforts should be made to stabilize expectations and pay attention to the high dividend and high cost performance of banks
According to the performance characteristics of the first quarter report of listed banks, affected by the macro economy and capital market, the growth rate of bank revenue and profit in the first quarter slowed down, the retail loan investment and the income in wealth business were restricted to some extent, and the risk of asset quality of some banks was also exposed. However, in the depressed environment of the industry, banks are still active. On the one hand, they strengthen credit supply, especially public loans, to ensure “price supplement by volume”. On the other hand, wealth business is actively promoted in customer groups, channels and other fields to pave the way for subsequent development. In the future, with the implementation of stable growth policies at the macro level and remarkable effects, the effective financing of entities is expected to be repaired, the bank credit structure and structural industry risks will also be gradually improved, and the performance is expected to remain basically stable during the year.
From the perspective of investment, the proportion of fund positions in banks rebounded in the first quarter, reflecting the defensive attribute of the sector. At present, the sector’s corresponding static Pb is only 0.61 times, which fully reflects the pessimistic expectations from the macro and micro levels. At the same time, the dividend rate of the sector is at an all-time high and the investment cost performance is high. We maintain the “recommended” rating of the sector and continue to recommend at the individual stock level: China Merchants, Ningbo, Chengdu, Hangzhou, Ping An, Societe Generale, Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) etc.
Risk tips
1) the downward pressure on the economy continues to increase, and the credit cost has increased significantly;
2) the repair of credit demand is less than expected, affecting the increment of bank scale;
3) business differentiation of small and medium-sized banks, major business risks of individual banks, etc.
