Highlights tracking: the 5-year LPR was reduced by 15bp. On May 20, the central bank authorized the national interbank lending center to announce the latest LPR quotation: the LPR for one-year period was 3.7%, the LPR for more than five years was 4.45%, down 15bp month on month. We believe that:
① release the strong signal of boosting real estate and maintaining stability of the economy, and there is still room for downward mortgage interest rate. The five-year LPR mainly affects residential mortgage loans. Previously, the central bank lowered the lower limit of the first set of interest rate by 20bp, which released a strong signal to maintain the stability of the real estate credit environment. In March 2022, the interest rate of newly issued housing loans was 5.49% (higher than the general loan interest rate of 51bp), which is still at a high level compared with history. It is expected that the follow-up mortgage interest rate still has downward space.
② impact on banks: the improvement of asset quality will bring some pressure on the interest margin.
On the one hand, the reduction of loan interest rate helps to reduce the debt burden of residents. At the same time, it will boost real estate sales to a certain extent (the epidemic still needs to improve, the economy stabilizes and the residents’ income is expected to improve), improve the operation of real estate enterprises, slow down the risks of real estate related assets of banks and improve the quality of assets.
On the other hand, with the repricing of existing mortgage loans and the reduction of the interest rate of newly issued loans, the yield of bank personal housing loans has decreased and the interest margin has decreased, which is expected to be mainly reflected in the first half of next year. Banks with a large proportion of mortgage business (large state-owned banks and China Merchants Bank) are relatively more affected. However, considering that since this year, the central bank has launched the market-oriented reform of deposit pricing mechanism and made clear its intention to reduce the cost of bank liabilities, the effect is worth looking forward to. On the whole, the downward space of bank interest rate spread is limited.
Sector performance: last week, the banking sector rose 0.81%, underperforming the CSI 300 index by 1.42pct (CSI 300 index rose 2.23%). In terms of individual stocks, China Merchants Bank Co.Ltd(600036) (7.56%), Ping An Bank Co.Ltd(000001) (2.81%), Jiangsu Jiangyin Rural Commercial Bank Co.Ltd(002807) (2.73%), China Minsheng Banking Corp.Ltd(600016) (1.89%), Bank Of Changsha Co.Ltd(601577) (1.21%) led the increase Bank Of Chengdu Co.Ltd(601838) (- 5.93%), Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) (- 5.93%), Bank Of Hangzhou Co.Ltd(600926) (- 5.33%), Jiangsu Suzhou Rural Commercial Bank Co.Ltd(603323) (- 3.62%), Bank Of Suzhou Co.Ltd(002966) (- 2.75%) decreased significantly.
Market tracking: last week, the central bank made a net return of 10 billion in open market operations, shibor001 and shibor007 were + 1bp and – 1bp respectively compared with last week, and dr001 and dr007 were + 1bp and + 3bp respectively compared with last week; 1. 3. The issuing interest rates of 6-month inter-bank certificates of deposit were – 1bp, – 138bp and – 12bp respectively compared with last week, with stable and abundant liquidity.
Investment suggestion: continue to be optimistic about the good growth of high-quality regional small and medium-sized banks in 2022. Small and medium-sized banks are expected to continue to expand rapidly, increase volume and stabilize price, and achieve rapid growth in net interest income under the good regional credit environment and credit demand; At the same time, the transformation strategy further promotes the optimization of income structure and thickening of profitability; The proportion of housing related loans is relatively small, and the asset quality is relatively stable due to prudent risk control. Highlight the high-quality urban commercial banks and rural commercial banks in Jiangsu and Zhejiang, Bank Of Ningbo Co.Ltd(002142) , Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) , Bank Of Hangzhou Co.Ltd(600926) , Bank Of Jiangsu Co.Ltd(600919) .
Risk tip: the economic stall and downturn lead to the deterioration of asset quality; The continuous spread of the epidemic has seriously affected the normal operation; Unexpected changes in regulatory policies, etc.
