Comments on the banking industry: downward interest rates boost strong banking stocks

From the Shenwan industry index, the banking index rose by 4.32%, 6.17% and 6.17% this week, this month and year to date respectively, ranking second, first and first among the 28 Shenwan industries.

On a weekly basis, Bank Of Ningbo Co.Ltd(002142) , Bank Of Hangzhou Co.Ltd(600926) , China Merchants Bank Co.Ltd(600036) and Ping An Bank Co.Ltd(000001) share prices rose by 9.21%, 8.38%, 7.91% and 6.25% respectively. On a monthly basis, Bank Of Chengdu Co.Ltd(601838) , Bank Of Jiangsu Co.Ltd(600919) , Industrial Bank Co.Ltd(601166) and Bank Of Hangzhou Co.Ltd(600926) share prices rose by 21.25%, 16.81%, 14.50% and 13.96% respectively. Since the beginning of the year, Bank Of Chengdu Co.Ltd(601838) , Bank Of Jiangsu Co.Ltd(600919) , Industrial Bank Co.Ltd(601166) , Bank Of Hangzhou Co.Ltd(600926) , Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) , Postal Savings Bank Of China Co.Ltd(601658) , Bank Of Nanjing Co.Ltd(601009) and Jiangsu Zhangjiagang Rural Commercial Bank Co.Ltd(002839) have increased by more than 10%.

Central bank operation and money market interest rate: net money supply, MLF interest rate decreased

The total amount of money put in this week was 500 billion yuan, the total amount returned was 50 billion yuan, and the net money put in was 450 billion yuan, an increase of 440 billion yuan compared with last week. Since the beginning of the month, the currency has realized a net recovery of 200 billion yuan.

The 1y medium term lending facility (MLF) interest rate was 2.85% this week, down 10bps from last month. The 7-day reverse repo rate was 2.10%, down 10bps from last week.

This week, the inter-bank bond pledge repo rate and interbank lending rate decreased. On January 21, dr007 was 2.35%, basically the same as last Friday. Dr001 was 2.14%, a decrease of 13bps compared with last Friday. The overnight lending rate was 2.13%, down 14 BPS from last Friday. The 7-day lending rate was 2.48%, down 9bps from last Friday.

Interbank deposit certificate issuing interest rate: 1y interbank deposit certificate issuing interest rate decreased

On January 21, the interest rates of 3M interbank certificates of deposit issued by state-owned banks, joint-stock banks, urban commercial banks and rural commercial banks were 2.25%, 2.35%, 2.51% and 2.70% respectively. Compared with last Friday, the changes were – 16bps, – 7bps, – 16bps and + 20bps respectively.

In terms of the issuing rate of 1y interbank certificates of deposit, the state-owned banks, joint-stock banks, urban commercial banks and rural commercial banks were 2.40%, 2.40%, 2.83% and 2.63% respectively, with changes of – 22bps, – 24bps, – 9bps and – 33bps respectively compared with last Friday.

China US Treasury bond yield: the term interest spread of China’s bonds widened and the term interest spread of US bonds narrowed

This week, the yields of 1y and 10Y treasury bonds decreased, and the term interest spread expanded. On January 21, the yields of 1y and 10Y treasury bonds were 2.00% and 2.71% respectively, with changes of – 17bps and – 8bps respectively compared with last Friday. The term spread was 0.71%, up 9bps from last Friday.

This week, the yield of 1y US bonds increased, the yield of 10Y US bonds decreased, and the term spread narrowed. On January 21, the yields of 1y and 10Y US bonds were 0.58% and 1.75% respectively, with changes of + 7bps and – 3bps respectively compared with last Friday. The term spread was 1.17%, down 10bps from last Friday.

Us liquidity index: the debt interest margin of non-financial enterprises decreased and the yield of tips increased

(1) on January 20, the US secured overnight financing interest rate was 0.04%, down 1bp compared with last Friday; (2) On January 20, the adjusted spread of US corporate bond options was 3.10%, down 1bp from last Friday; (3) On January 21, the yield of US inflation index treasury bonds (TIPS) was – 0.59%, up 7bps from last Friday.

Investment advice

This week, the policy is concentrated, and MLF, LPR and SLF are lowered one after another, showing the determination of the policy to stabilize growth and the transformation from refinancing and various support tools to interest rate adjustment. From the perspective of valuation, the policy is conducive to improving bank valuation. From the perspective of operation, although from the top-down perspective, various conclusions are full of controversy. However, the retail nature of LPR determines that the optimal solution of banks is small and micro loans and personal loans. We still recommend Ningbo, China Merchants, postal savings and Ping An Bank.

Risk tips

The macro economy went down faster than expected.

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