Banking Industry: Jiangsu Zhangjiagang Rural Commercial Bank Co.Ltd(002839) Semi-annual report debut, banking industry mid-year report season is worth looking forward to

Investment highlights.

The banking sector has seen a decline in index volatility over the past 26 weeks, with valuations rising this week (8.8-8.12) and good liquidity in the funding market. As of the last trading day of this week, the P/N ratio was 0.56, the valuation level was stable on a weekly basis, the market heat decreased, the average daily trading volume was 988.1 billion yuan (-4.7% week-over-week), the central bank’s wide caliber (including 7-day reverse repo) net repos of 2 billion yuan this week, the 7-day reverse repo rate was maintained at 2.10%, the overall liquidity was at a better level; Friday (August 12) announced the DR007 weighted value of 1.35%, up 5bps week-on-week, lower than the reverse repo rate, liquidity tends to be better.

Zhangjiagang Bank released its 2022 interim results, with net profit attributable to the mother company increasing by nearly 30% y-o-y. On August 10, 2022, Zhangjiagang Bank announced its 2022 semi-annual report, being the first one announced for the banking sector. The overall data is similar to the results snapshot announced on July 10, with revenue up 5.74% year-on-year to 2.353 billion yuan and net profit attributable to the mother increased 27.76% year-on-year to 762 million yuan. Asset quality dimension continued to improve, with the non-performing ratio dropping 5bps to 0.9% and the provision coverage ratio rising significantly by 58 percentage points to 533%, with good performance resilience. The balance of two small loans exceeded 44.4 billion yuan, up about 4.6 billion yuan from the beginning of the year, an increase of more than 11% year-on-year.

Monetary policy in the first half of the year maintained a reasonable abundance of liquidity, promoting lower financing costs and ensuring internal and external balance. This week, the central bank published the report on the implementation of China’s monetary policy in the second quarter of 2022: under the effectiveness of the huge pressure on GDP in the second quarter of 0.4% year-on-year growth, GDP in the first half of this year completed year-on-year growth of 2.5%, CPI rose 1.7% over the same period, high inflation background of China’s prices to achieve overall stability. In the first half of the year, the government lowered the standard by 0.25 percentage points and paid in 900 billion yuan in profits, and made full use of rediscounting and other tools to maintain a reasonable abundance of liquidity. In addition, structural tools were provided to support special areas such as small and medium-sized enterprises for the benefit of the general public to reduce the financing costs of real enterprises.

Market Performance and Suggested Concerns

The banking sector index rose 0.33% this week, outperforming the broader market. This week, the Shanghai Composite Index rose 1.55%, Shenzhen Cheng Index rose 1.22%, GEM Index rose 0.27% and CSI 300 Index rose 0.82%. It is recommended to focus on: 1) high-quality joint-stock banks ( Ping An Bank Co.Ltd(000001) , Industrial Bank Co.Ltd(601166) , China Merchants Bank Co.Ltd(600036) ) elastic return; 2) low-valuation state-owned large banks: Postal Savings Bank Of China Co.Ltd(601658) , China Construction Bank Corporation(601939) ; 3) high-quality city agricultural and commercial banks ( Bank Of Chengdu Co.Ltd(601838) , Bank Of Ningbo Co.Ltd(002142) , Bank Of Jiangsu Co.Ltd(600919) , Bank Of Hangzhou Co.Ltd(600926) , Jiangsu Jiangyin Rural Commercial Bank Co.Ltd(002807) ( Shanghai Rural Commercial Bank Co.Ltd(601825) ).

Risk tips

The impact of the epidemic on the economy, the risk of lower asset quality and higher non-performing ratio of banks due to the slowdown of economic growth, the risk of deterioration of the international environment, the outbreak of major risks and default events, etc.

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