The national interbank lending center authorized by the people’s Bank of China announced that on January 20, the LPR for one-year period was 3.7%, and the LPR for more than five years was 4.6%, down 10bp and 5bp respectively compared with the previous period.
The reduction of LPR quotation is in line with market expectations and focuses on the effect of credit easing. Following the reduction of MLF and Omo interest rates on January 17, the reduction of LPR quotation is in line with market expectations and continues to release positive signals of stable growth and real estate. We believe that the LPR quotation has limited impact on the interest rate spread in 2022, mainly promoting the transmission of cost reduction from the liability side to the asset side, aiming to protect the real economy and enterprises, help to improve the bank’s credit demand and asset quality, and “favorable” banks are the main line. Follow up attention will be paid to the effect of credit easing, and subsequent operations may still be made according to the effect of policy implementation.
This year, the main line affecting bank stock investment will continue to focus on economic and real estate fundamentals, steady growth and real estate policies. At the beginning of the year, the steady growth and real estate policies were accelerated. The management also made it clear to strengthen steady growth. At the 18th meeting, the central bank made it clear that it was sufficient, accurate and forward. There is still room and impetus for steady growth and real estate policies. If the economic data are still weak and the implementation effectiveness of credit and other relevant measures is insufficient, the policies may continue to work to ensure the effectiveness of steady growth and real estate until the economic and real estate data and expectations are improved. It is expected that the industry may continue to fluctuate upward in the expected alternating changes of economy and policy.
In terms of individual stocks, it is recommended to pay attention to regional banks with rapid performance growth, such as Bank Of Hangzhou Co.Ltd(600926) , Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) , Bank Of Jiangsu Co.Ltd(600919) , and continuous recommendation of core targets: Bank Of Ningbo Co.Ltd(002142) , China Merchants Bank Co.Ltd(600036) , Postal Savings Bank Of China Co.Ltd(601658) .
The LPR reduction came as scheduled, and the forward-looking operation strengthened the counter cyclical adjustment
After the central bank lowered MLF and Omo interest rates on January 17, the central bank lowered the 1-year and 5-year LPR quotations, and the steady growth policy continued to increase. The reduction of LPR quoted interest rate is in line with market expectations. For the difference in the reduction range of long-term and short-term LPR, we believe that mainly considering the positioning of “real estate is not fried”, the downward range of one-year LPR is greater, indicating its support for entity liquidity and real estate trust. Considering the time point, as stated in the press conference on financial statistics in 2021, it is a “forward-looking operation” and “walking ahead of the market curve”, taking into account the judgment of China’s economic situation and the expectation of overseas interest rate hikes.
LPR reduction is expected to have a limited impact on the interest margin in 2022
The reduction of LPR quotation is based on the reduction of market interest rate to guide the decline of liability side cost, rather than the unilateral decline of asset side, so as to alleviate the pressure of narrowing interest margin. Considering that the repricing date of stock mortgage loans is mainly divided into January 1 or loan issuance date of each year, the impact of the reduction of 5-year LPR quotation on the mortgage yield in 2022 is mainly reflected in the newly issued and selected mortgage loans priced on the lending date, which is expected to have a limited impact on the interest margin this year, while the impact of stock mortgage interest rate repricing on the interest margin is mainly reflected in 2023.
Make policy decisions according to circumstances and pay attention to the effectiveness of credit relief
Recently, the regulation has successively released positive signals of steady growth. In addition to the force of monetary policy, the rhythm of local bond issuance is ahead in 2022, and the marginal real estate policy in some regions is relaxed. Considering the deposit reserve ratio of financial institutions (currently the average deposit reserve ratio of financial institutions is 8.4%) and the level of bank interest margin, we believe that there is limited space for short-term reserve requirement reduction and interest rate reduction. Future policies may focus on the implementation effect of overweight policy, and pay attention to the effect of “wide credit” policy in the future.
Risk warning: large-scale outbreak of real estate default risk; The economy fell sharply, exceeding expectations.
