As of January 19, 14 A-share listed banks have released their performance express for 2021, with bright indicators – the year-on-year increase of net profit was basically 20% (11 banks), the non-performing rate decreased and the provision coverage increased. Compared with 2020, the profitability of listed banks has recovered significantly in 2021.
The performance of “super combustion” ignited the market enthusiasm of the banking sector after the beginning of the year. As of yesterday’s close, the bank index has ranked first in all sectors this year, and the main funds have shown a net inflow. Considering monetary policy factors such as economic stabilization and substantial reduction of medium-term lending facility (MLF), many market institutions take a clear stand and look at banks. It is expected that the profit growth of banks will return to normal in 2022, and the overall profit growth of A-share listed banks will be about 7%. Yesterday, S & P, a foreign rating agency, raised the ratings of 11 Chinese banks and voted for it.
11 companies started with 20% performance growth
At present, if the listed banks that have disclosed the performance express of 2021 do not consider the low base of the previous year, their profits have exceeded the level before the epidemic. Except for China Everbright Bank Company Limited Co.Ltd(601818) , China Citic Bank Corporation Limited(601998) , Bank Of Changsha Co.Ltd(601577) , the net profit attributable to the parent company of the other 11 listed banks that disclosed the performance express in 2021 increased by more than 20% year-on-year.
By the end of 2021, the net profits of China Merchants Bank Co.Ltd(600036) , Industrial Bank Co.Ltd(601166) , Ping An Bank Co.Ltd(000001) had increased by 23.20%, 24.10% and 25.6% respectively year-on-year. The profitability of regional banks is also very strong, especially the head city commercial bank. By the end of 2021, the net profits of Bank Of Jiangsu Co.Ltd(600919) , Bank Of Ningbo Co.Ltd(002142) , Jiangsu Zhangjiagang Rural Commercial Bank Co.Ltd(002839) , Bank Of Suzhou Co.Ltd(002966) , Jiangsu Suzhou Rural Commercial Bank Co.Ltd(603323) , Bank Of Qingdao Co.Ltd(002948) , Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) , Jiangsu Jiangyin Rural Commercial Bank Co.Ltd(002807) had increased by 30.72%, 29.67%, 29.77%, 20.57%, 20.72%, 22%, 21.13% and 20.81% respectively.
While the performance improved, the overall asset quality of the above banks continued to improve simultaneously, and the non-performing rate continued to decline. The non-performing rate of China Merchants Bank Co.Ltd(600036) , Bank Of Ningbo Co.Ltd(002142) , Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) , Jiangsu Zhangjiagang Rural Commercial Bank Co.Ltd(002839) and other four banks has decreased to less than 1%, 0.91%, 0.77%, 0.81% and 0.95% respectively.
The provision coverage of the above banks has been greatly improved, which not only means that the risk offsetting capacity has been further enhanced, but also indicates that the profit has not been adjusted by releasing the provision. Among them, the provision coverage of China Merchants Bank Co.Ltd(600036) , Jiangsu Zhangjiagang Rural Commercial Bank Co.Ltd(002839) , Jiangsu Suzhou Rural Commercial Bank Co.Ltd(603323) with solid family background exceeds 400%, and Bank Of Ningbo Co.Ltd(002142) , Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) exceeds 500%.
The performance of the above banks met market expectations and began to show signs as early as the third quarter of last year. To sum up, the reasons are clear: first, the epidemic and other adverse factors have gradually subsided, the economy has gradually recovered, the demand for corporate credit has recovered, and the investment of bank assets is relatively large. For example, the growth rate of Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) and Bank Of Ningbo Co.Ltd(002142) loans is as high as 23.22% and 25.45% respectively; Second, the risks such as bad debts are gradually cleared, which greatly reduces the pressure on banks to withdraw credit impairment and will not “eat” profits because of the withdrawal.
China Merchants Securities Co.Ltd(600999) Liao Zhiming, chief banking analyst, said that in 2021, the impact of the epidemic subsided, the asset quality was stable and good, and the credit cost was down. It is expected that the overall profit growth rate of A-share listed banks will be about 8%, which will be the highest level since 2015.
return to normal profit growth in 2022
At present, the market is more concerned about whether listed banks can maintain high growth in 2022? Does the high growth return to normal?
In the view of insiders, as a pro cyclical industry, the factors affecting the bank’s income generating ability are nothing more than the following:
First, macroeconomic performance. The macro-economy is improving and the demand for credit is sufficient. Relying on the old way of “increasing profits on a large scale”, banks can generally obtain good returns.
Second, the credit environment. If it is in the interest rate reduction cycle and wide credit environment, the bank interest margin will be impacted and the ability to make money will be affected.
Third, credit risk. This determines the level of bad debt risk of banks. Once enterprises default more and non-performing loans increase significantly, it will consume bank profits.
At present, the macro economy is under repair, and the economic growth will be “stable” in 2022. In terms of monetary policy, recently, the central bank first lowered the one-year MLF interest rate 10bp to 2.85%, and then stressed the initiative and forward force, releasing a strong signal of “wide credit” and “stable growth”, which may impact the bank’s net interest margin. In addition, the bank’s confidence in the industry has not really recovered for the wide-ranging real estate financing.
Despite the pressure, banks are actively striving for credit and other indicators to “get off to a good start”. Changjiang Securities Company Limited(000783) banking analyst Ma Xiangyun said that it is expected that social finance, credit growth, PMI and other indicators will rise in the first quarter of 2022, and “steady growth” will initially show results. From the perspective of credit, new and old infrastructure, real estate (the first quarter itself is also the key delivery time point of development loans) and manufacturing industry are developing. It is expected that the year-on-year growth rate of domestic and foreign currency loan balance in the first quarter will rise to 11.3% and the net new scale will increase by 17.1% year-on-year.
From the survey of listed banks conducted by institutions in January, retail business will be the starting point of many banks in 2022. Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) said that in 2022, more attention will be paid to matching the deposit growth and capital consumption, and it is expected that more than two-thirds of the loans in the whole year will be invested in the personal field. Bank Of Suzhou Co.Ltd(002966) said that in 2022, it will flexibly adjust the retail loan investment strategy, actively cater to the consumer market and strive to increase the investment of consumer finance loans while ensuring customers’ rigid housing investment demand and realizing mortgage investment.
For the overall profitability of listed banks in 2022, market institutions are optimistic that it will return to normal.
In its report, the financial research center predicted that in 2022, bank profit growth will return to normal and industry differentiation will intensify. It is expected that the annual net profit attributable to the parent company of listed banks will increase by about 6.5% year-on-year, and the non-performing rate will remain at about 1.8%.
Liao Zhiming said that looking forward to 2022, the economy is expected to stabilize and recover, the interest margin is stable, the asset scale is steadily expanded, and the credit cost remains stable and slightly reduced. It is expected that the overall profit growth rate of A-share listed banks will be about 7%, which is a high level in recent six years.
bank stock market is expected
As of yesterday’s closing, the A-share banking sector index (Shenwan level) has risen by 4.41% this year, ranking first in all sectors, and the net inflow of main funds has exceeded 1 billion yuan. The newly listed new shares of Bank of Lanzhou rose the limit for three consecutive days, and some regional urban commercial banks have increased by more than 10% since the beginning of the year, Bank Of Chengdu Co.Ltd(601838) by more than 20%.
For the trend of bank stocks this year, market institutional analysts made it clear that they are bullish on the bank sector and think it has configuration value. The increase of the sector is about the same as that in 2019, and the performance of individual stocks will be more differentiated.
Citic Securities Company Limited(600030) the report believes that the expectation of “wide credit” brought by “interest rate reduction” and “reserve requirement reduction” makes the banking sector also benefit from the large-scale growth of credit, which is expected to make up for the narrowing of interest rate spread. In addition, the expectations of steady growth, improvement of real economy fundamentals and decline of non-performing rate, the bank stocks that continue to underestimate the low allocation are also expected to make up for the rise.
Ma Xiangyun believes that the trend of bank stocks depends not on monetary policy, but on growth expectations. “I believe that ‘credit easing’ will eventually take effect. It is expected that the year-on-year growth rate of social finance will pick up in the first quarter, and the economic indicators will pick up, driving the rise of bank stocks.”
Liao Zhiming said that under the steady growth overweight, he was actively bullish on the banking sector. In the macro interest rate environment in 2022 or similar to 2019, the growth of the banking sector that has not risen for two consecutive years is expected to be comparable to that in 2019, or 20%. He suggested that banks with good business areas, perfect corporate governance, strong management ability and clear strategy should be selected, such as good banks in Jiangsu, Zhejiang and the Pearl River Delta.
Rating giants have also voted for Chinese banks. Yesterday, S & P raised the credit rating of 11 Chinese bank issuers, including China Merchants Bank Co.Ltd(600036) , China Citic Bank Corporation Limited(601998) , Ping An Bank Co.Ltd(000001) , with a outlook of “stable” or “positive”.
