At the beginning of 2022, when A-Shares were cold started, bank stocks performed quite well. From the first trading day of the new year to January 13, the bank sector (Shenwan) index increased by 4.11%, showing a strong momentum. However, on January 14, the banking sector temporarily ended its singing all the way since the beginning of the year and ushered in a correction.
Can the strong performance at the beginning of the year continue? Yan Meizhi, head of China financial industry research at UBS, told the economic observer that the banking sector performed relatively well in the first quarter. If the market rebounds in the second and third quarters or after the middle of the year, it may not perform as well as other industries. She believes that from the second quarter, China and Hong Kong markets may rebound as economic growth may reach the bottom and more policies are relaxed. In such an environment, Chinese banks may perform poorly.
There are also a number of brokerage analysts actively looking at the banking sector. Everbright Securities Company Limited(601788) Wang Yifeng, chief banking analyst, believes that there are three reasons why the banking sector is expected to remain strong: first, the real estate risk is gradually mitigated, and the market pessimistic expectation is in the process of repair; Second, the key to steady growth lies in “steady investment”, which requires “wide credit”, and the market has expectations for “wide credit”; Third, the preference of funds for undervalued sectors increased, and bank stocks usually performed well in the beginning of the year
the index recovered at the beginning of the year
Since the beginning of this year, the bank index has risen by more than 4%, which is significantly better than other sectors. In comparison, the Shanghai index has fallen by 3.26% year to date. According to wind data, in the nine trading days from January 1 to 13, except for Bank Of Ningbo Co.Ltd(002142) , the share prices of 40 A-share listed banks rose to varying degrees. Bank Of Jiangsu Co.Ltd(600919) , Bank Of Chengdu Co.Ltd(601838) , Jiangsu Suzhou Rural Commercial Bank Co.Ltd(603323) , Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) , Industrial Bank Co.Ltd(601166) , Postal Savings Bank Of China Co.Ltd(601658) increased by more than 10%, and Bank Of Nanjing Co.Ltd(601009) , Jiangsu Zhangjiagang Rural Commercial Bank Co.Ltd(002839) , Bank Of Hangzhou Co.Ltd(600926) , Wuxi Rural Commercial Bank Co.Ltd(600908) increased by more than 5%.
Under the downward trend of the market and the correction of the banking sector on January 14, Bank Of Chengdu Co.Ltd(601838) , Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) and Bank Of Jiangsu Co.Ltd(600919) also increased by more than 10% this year.
Wang Yifeng resumed the market of the banking sector in recent ten years, and the trend of the banking sector was good in the first quarter of most years; Especially in January, in 2020 excluding the impact of the epidemic, the banking sector recorded a winning rate of relative returns of up to 90%.
In the market performance over the past five years, from 2017 to 2019 and January 2021, the banking sector increased by 4.5%, 12.5%, 8.2% and 7.5% respectively, and the corresponding industry sectors ranked 3 / 30, 2 / 30, 4 / 30 and 3 / 30.
At the beginning of 2021, the growth of bank stocks was relatively good. Yan Meizhi said that it was because of the continuation of the good profit rebound after October 2020. Moreover, China was the first to get out of the epidemic in 2020, monetary policy tended to normalize in the third quarter, and liquidity and other aspects were tightening. This environment had a positive impact on bank interest rate spread, so the trend continued until the first half of 2021.
However, the rise ended in May. From the end of June to the end of December 2021, the banking sector fell by 8.29%, and the banking stocks ended the market in the last week of 2021.
\u3000\u3000 “The downward trend of bank stocks was obvious in the late second quarter of last year, and the reserve requirement was lowered in July. The rise was less in the second half of 2021, mainly because: one was the economy and other factors, including the impact of real estate and the overall economic consumption, which was weaker than originally thought, so the overall recovery was weaker. In addition, there were many regulatory changes at that time, resulting in problems in many other industries 。 Banks also follow the general trend and do not have much performance. ” Yan Meizhi’s analysis to reporters.
According to the comparative calculation of multiple indexes provided by MSCI, Morgan Stanley and other institutions, UBS Bank Of China Limited(601988) industry index outperformed the A-share market index, with an excess performance of 25%. Although outperforming the market, looking back at the trend of individual stocks in the whole year at the end of 2021, more than 70% of the 41 listed banks with A-Shares fell, and 90% of the bank shares fell below the net value
performance forecast of several listed banks in 2021
Analysts believe that the strong performance of bank stocks in the beginning of the year is related to the good performance of listed banks in 2021. “Good news came one after another. We were embarrassed to say that the profit growth rate was not 20%. We took a clear-cut stand to call for bank stocks and actively look at the banking sector in 2022.” China Merchants Securities Co.Ltd(600999) said Liao Zhiming, chief analyst of banking industry.
On January 4, Bank Of Chengdu Co.Ltd(601838) disclosed the announcement of performance pre increase, and it is expected that the net profit last year will increase by about 18% ~ 25% year-on-year. Since then, six banks including Jiangsu Suzhou Rural Commercial Bank Co.Ltd(603323) , Bank Of Jiangsu Co.Ltd(600919) , Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) , China Citic Bank Corporation Limited(601998) , Industrial Bank Co.Ltd(601166) and Ping An Bank Co.Ltd(000001) have disclosed their performance express. On the whole, the growth rate of net profit attributable to the parent company has exceeded 20%.
Subsequent contingent listed banks have successively disclosed performance forecasts for 2021. Yan Meizhi predicts that the net profit growth of listed banks may show a rapid growth in 2021. Among them, state-owned banks will increase by more than 10%, and some joint-stock banks and urban commercial banks are expected to increase by 20% to 30%.
Among the banks that have disclosed the performance forecast, Bank Of Jiangsu Co.Ltd(600919) has excellent performance, and the net profit attributable to the parent increased by more than 30%, the growth rate reaching a ten-year high. By the end of December 2021, the bank’s annual revenue and net profit attributable to the parent were 63.771 billion yuan and 19.694 billion yuan respectively, with a year-on-year increase of 22.58% and 30.72% respectively.
On January 10, Industrial Bank Co.Ltd(601166) disclosed that the annual performance express of 2021 showed that the bank’s revenue last year was 221.24 billion yuan, a year-on-year increase of 8.9%, and the net profit attributable to the parent was 82.68 billion yuan, a year-on-year increase of 24.1%. The annual net profit growth hit a new high in the past eight years.
On January 13, Ping An Bank Co.Ltd(000001) released its performance express, which showed that the bank realized a net profit of 36.336 billion yuan in 2021, a year-on-year increase of 25.6%.
In terms of asset quality, the non-performing loans of several banks that issued performance forecasts also improved. For example, Bank Of Jiangsu Co.Ltd(600919) said that by the end of the fourth quarter of 2021, the non-performing rate of the bank had fallen 4bp month on month to 1.08%, the lowest in eight years; China Citic Bank Corporation Limited(601998) performance express also shows that by the end of December 2021, the bank’s non-performing loan ratio was 1.39%, down 0.25 percentage points from the end of the previous year; The provision coverage rate was 182.14%, an increase of 10.46 percentage points over the end of the previous year. Jiangsu Suzhou Rural Commercial Bank Co.Ltd(603323) asset quality was further optimized. By the end of 2021, the bank’s non-performing loan ratio was 1%, down 0.28 percentage points from the beginning of the year; The provision coverage rate reached 411.1%, an increase of 105.79 percentage points over the beginning of the year.
“Compared with 2020, bank profits rebounded strongly in 2021, mainly because banks significantly increased their provisions in 2020 due to the epidemic. Therefore, the base of Bank net profits in 2020 was low, resulting in a large rebound in bank performance in 2021.” Yan Meizhi believes that in 2022, the growth base of Bank net profit is no longer low, and the banking industry will face many challenges. Therefore, the performance growth rate will decline, but the downward range will not be large
in 2022, bank stocks rose “dance music” in midfield
A number of brokerage analysts said they were clearly optimistic about bank stocks. “Bank stocks rose, and the \’dance music\’ is still in the middle.” Wang Yifeng believes that the banking sector is expected to remain strong in the future.
How to view the trend of bank stocks in the whole year? Yan Meizhi believes that 2022 will be strong first and then weak. She analyzed that the bank has a lot of room because the valuation is relatively cheap, and the price has reflected all kinds of risks. Therefore, when the market is bad, it is what investors are willing to buy. Since the beginning of the year in January, the MSci (China) bank index has increased by about 5%. Compared with the whole market, it has fallen by about 0.2% – 0.3%, so its performance is beyond expectations and the market.
The market is concerned about whether this unexpected performance can continue. Yan Meizhi believes that the performance in the first quarter will continue. In the first quarter, large real estate developers may continue to default on overseas US dollar bonds, the market will fluctuate sharply, and banks appear relatively stable in a risk environment.
Yan Meizhi believes that China’s economy will pick up in the second quarter or the middle of the year. The first quarter is usually a period of high credit supply, so after that, economic activities should improve. In this case, we think the whole market will become better in the second quarter and after the middle of the year. In the case of a better rebound in the market, banks may not rise so much.
“The first quarter is still relatively good. If the market rebounds in the second and third quarters or after the middle of the year, it may not perform as well as other industries. This is the overall view.” Yan Meizhi said.
Recently, A-share listed banks are about to usher in new members. On January 17, Lanzhou bank was listed on the main board of Shenzhen Stock Exchange. Therefore, Bank of Lanzhou will also become the first bank share and the 42nd bank share of a share in 2022.
As of the closing on January 14, only 11 of the 41 A-share bank shares had not fallen below the net value. With more banks landing in the capital market, in addition to paying attention to the whole sector, perhaps the internal market value differentiation of bank shares will continue in 2022.
