Investment suggestions:
At the end of the year, industrial policies were issued intensively, and steady growth is still the main theme of the industry. From December to January, the people’s Bank of China and the China Banking and Insurance Regulatory Commission issued policies and regulations on macro Prudential policy guidelines (for Trial Implementation), measures for the administration of connected transactions of banking and insurance institutions, rules for the supervision of solvency of insurance companies (II), measures for the management of liquidity risk of financial products of financial management companies, and the continuous conversion of two direct tools, with obvious intention of stabilizing growth.
The growth rate of deposits and loans remained stable, and the scale of social financing continued to grow. At the level of monetary policy, the steady growth trend continued. At the end of December, the balance of RMB deposits was 232.25 trillion yuan, a year-on-year increase of 9.3%, an increase of 0.7 percentage points over the end of last month; RMB loans increased by 1.13 trillion yuan, and the growth rate was basically the same as that in November. The growth momentum of social finance scale continued, and the stock increased by 10.3% year-on-year. Since October, it has continued to rise, and the growth rates of M1 and M2 have also bottomed out. The macro liquidity under the broad monetary policy has improved, but it will take time for transmission, and the recovery momentum of loans from loan end residents and enterprises is insufficient.
We will broaden the monetary environment and increase the total amount of credit. The economic work conference in December pointed out that China’s economic development is facing triple pressures of shrinking demand, supply shock and weakening expectation, and required that the economic work in 2022 should be “stable and seek progress while maintaining stability”, and the monetary policy should be “flexible and appropriate, and maintain reasonable and abundant liquidity”. Based on the policy requirements, the implementation of monetary policy support tools was accelerated. On January 20, the latest 1-year and 5-year LPR were 3.70% and 4.60% respectively, which continued to decline by 0.1 and 0.05 percentage points compared with December. The reduction of LPR interest rate will bring some pressure on the income side of banks, but with the gradual transmission of loose monetary policy to the real economy, it will lead to the recovery of credit volume and the improvement of profitability of the real economy, and banks will benefit from asset quality and credit supply.
Sector valuation improved. The bank index rose 0.22% in December, narrowed compared with the decline of Shanghai and Shenzhen 300, Shenzhen Composite Index and Shanghai Composite Index, and the correction of the bank sector was obvious. Since January, the performance of the sector has been outstanding. Since the beginning of the year, the sector index has increased by 6.16%, realizing obvious relative and absolute returns. It ranks first in CITIC’s primary industry index, Bank Of Chengdu Co.Ltd(601838) and Bank Of Jiangsu Co.Ltd(600919) have increased by more than 15%, but the Pb of the industry is only 0.66X, which is still at the bottom of history. The operating performance of listed banks continued to improve in 2021. From the perspective of listed banks that disclosed the performance express, the growth rate of net profit was generally in double digits, and more than 20%. On the premise that the policy underpinning economy and industry prosperity are expected to improve, the sector valuation is expected to continue to repair. Some urban commercial banks relying on the vitality of regional economic development have low valuation, perfect business layout, steady and upward profitability and excellent asset quality. They are expected to have large development space, such as Bank Of Chengdu Co.Ltd(601838) , Bank Of Jiangsu Co.Ltd(600919) , Bank Of Hangzhou Co.Ltd(600926) , Bank Of Nanjing Co.Ltd(601009) , Bank Of Ningbo Co.Ltd(002142) . At the same time, they can pay attention to the investment opportunities brought by the improvement of the performance of some joint-stock industries, such as Industrial Bank Co.Ltd(601166) , China Merchants Bank Co.Ltd(600036) , Ping An Bank Co.Ltd(000001) .
Risk warning: the downward pressure on the economy is increasing; Deterioration of asset quality; Recurrent epidemic
