Asymmetric decline of LPR: the 5-year LPR decreased by 15bp at one time, exceeding the expectation; The 1-year LPR remains unchanged. On May 20, the five-year LPR decreased again: the one-year LPR was 3.70%, the last time was 3.70%, the varieties with a period of more than five years were 4.45%, and the last time was 4.60%. The 5y-1ylpr spread narrowed to 75bp, the lowest level since April 2020. The background of the 5-year LPR reduction beyond expectations: on the one hand, the impact of the epidemic superimposed on the continuous decline of the real estate industry chain, which had varying degrees of impact on residents and enterprises and dragged down the economy. On the other hand, since the beginning of the year, the central bank has adopted a series of measures to strengthen the supervision of deposit interest rates, promote the market-oriented reform of deposit interest rates, effectively reduce the cost of bank liabilities, and provide space for the downward trend of long-end LPR. According to the central bank, the weighted interest rate of new deposits in March was 2.37%, and the interest rate of medium and long-term time deposits decreased significantly. The interest rate of 3-year and 5-year time deposits decreased by 0.18%, 0.43% and 0.45% respectively compared with May 21. Evaluation on the effect of five-year LPR reduction: the coverage of adjusting the financing cost of the whole society is greater, and the scale of interest expenditure saved is RMB 2014 billion, which is conducive to stabilizing consumption and expectations and enhancing market confidence. According to the credit income and expenditure statement of financial institutions, as of April 2022, the balance of various loans of financial institutions was 207.8 trillion, of which medium and long-term loans of enterprises and residents accounted for 38.2% and 26.4% respectively (short-term loans of enterprises accounted for 23%). Assuming that the pricing of all medium and long-term loans is reduced synchronously based on the five-year LPR, the interest rate reduction can save the whole society interest expenditure of RMB 2014 billion.
Quantitative calculation of the impact on the bank: considering the comprehensive factors, the 2022e interest margin of the bank was dragged down by 1.4bp and the pre tax profit was dragged down by 1.3%, and the urban rural commercial bank was less impacted. 1. Only consider the unilateral impact of the asset side interest rate reduction: the 5-year LPR reduction will drag down the interest margin of listed banks by 2.7bp and pre tax profit by 2.5% in 2022. Considering the good start of credit supply in the first quarter of this year, the 23-year repricing has a greater drag on the interest margin and pre tax profit, the interest margin in 2023 is 2.8bp, and the pre tax profit is 2.7%. From the perspective of structure, the impact on state-owned banks is the largest and the impact on joint-stock banks during the year is small. On the one hand, joint-stock banks are the main force of retail development in recent years, and the proportion of retail loans is the highest in all sectors, while the proportion of medium and long-term corporate loans is relatively low. On the other hand, it also has the impact of repricing structure. The repricing loans of state-owned stock banks are concentrated in the first quarter (accounting for more than 40%), The proportion of repriced loans of 3m-1y is high. 2. Taking all factors into consideration, if the upper limit of deposit pricing is lowered by 10bp + the 5-year LPR is lowered by 20bp + the lower limit of first house loan pricing is lowered by 20bp, it will drag down the interest margin of listed banks by 1.4bp and pre tax profit by 1.3% in 2022. The impact will be greater in 2023: the repricing proportion of loan stock is high, and the mitigation effect of deposit cost is weakened; The interest margin dragged down 2.6bp and the profit before tax was 2.4%. From the perspective of structure, the impact on state-owned banks is the most obvious, and the comprehensive impact on rural commercial banks is the least. The range of impact is state-owned banks joint-stock banks urban commercial banks rural commercial banks. Among them, the interest margin and pre tax profit of individual stocks in 2022 show a positive impact, and there are Everbright and Ping An in the stock line; The city commercial banks include Nanjing, Ningbo, Guiyang, Changsha, Xi'an and Suzhou; Agricultural and commercial banks include Jiangyin and Changshu.
Investment suggestion: optimistic about the banking sector; Choose a strong target for growth. The decline in market risk appetite is conducive to the undervalued banking sector, and steady growth is expected to continue to drive the banking sector. In stock selection, banks with strong assets and solid asset quality should be selected (demand is declining; the economy is under pressure). We mainly recommend the urban rural commercial banks with good industrial and regional layout. Considering the valuation factors, we suggest to pay attention to Jiangsu, Nanjing and Suzhou in the near future.
Risk warning event: the economic downturn exceeded expectations.
