The big state-owned banks, which investors once ignored, are now "unaffordable". Over the past year, the share prices of major state-owned banks have quietly hit new highs.
On January 5, Agricultural Bank of China's A-shares reached 378 yuan shares, a new high since its listing in July 2010 for 13 years; H-shares also reached 3HK$08 shares. Investors suddenly found that in 2023, the share price of ABC's A-shares will rise by 40%, and H-shares will also rise by more than 25%.
Shares of other major state-owned banks also rose well. Industrial and Commercial Bank of China, China Construction Bank, Bank of China and Bank of Communications A-share shares rose by about 35% and 35% respectively.
At the same time, the Shanghai Composite Index has fallen by more than 6% in the past year, and has now begun a "2,900 points" defense war; The GEM index is about 25%. Popular sectors such as new energy, liquor, and medical care have broken investors' hearts.
However, in the past many years, bank stocks have been a different tragic picture: stable profit growth but unable to stop the stock price**, breaking the net (falling below the net assets per share) is the norm; Executives increased their holdings or called on investors to buy, but the stock price still did not improve; Institutional investors have fled the banking sector ......
Why are bank stocks "really fragrant" again?
"Earnings overtake wealth management", the governors are working hard to promote bank stocks
The stock price is grossly undervalued, which has become a knot in the hearts of bank executives, especially the presidents of major state-owned banks.
On August 30, 2023, at the 2023 interim results meeting of ICBC, Xueqing, secretary of the board of directors of ICBC, introduced: Considering the cash dividend and ** premium, since its listing 16 years ago, the annualized rate of return of ICBC's A shares and H shares has reached 60% and 57%。"As long as our shareholders hold ICBC for a long time, they can get long-term and higher returns. This is a very attractive value investment. ”
Guan Xueqing said that although ICBC's PB (price-to-book ratio, stock price, net assets per share, commonly used valuation indicators in the banking industry, the higher the PB, the more recognized by investors) is at a better level among comparable peers, it is still in a state of temporary serious undervaluation.
At the end of March 2023, Han Qiang, then secretary of the board of directors of the Agricultural Bank of China, also said at the bank's 2022 annual performance meeting that the market value of the Agricultural Bank is currently significantly undervalued.
South Korea said that although the stock price has recovered, the valuation level is still low. The net ratio of a** is only 049, H** net rate is only 042, "This is obviously inconsistent with ABC's high-value operating performance, high-return dividend ratio, and high-quality development trend." ”
ABC's 2022 A-share dividend yield is about 76%, H share dividend yield of about 93%, which significantly exceeds the income level of treasury bonds and wealth management products in the same period.
At the press conference of the State Council Information Office held on March 2, 2022, the question of "the stock prices of large banks have been sluggish" was thrown to Tian Guoguo, chairman of CCB.
Tian Guoli said at the press conference that after the subprime mortgage crisis in 2008, the business model of traditional commercial banks was increasingly unfavorable to investors. The valuation level has changed from more than 2 times the original price-to-book ratio to less than 1 times.
Tian Guoguo said that in the long run, the dividend yield of bank stocks (the ratio of dividends to ***, which is an important indicator to measure the value of investment) has been far higher than that of financial products, and at the same time, there are opportunities to make profits after holding.
Tian Guoguo's speech sparked heated discussions in the market at the time, but the stock prices of banks, including CCB, still did not improve much.
Earlier, at the 2019 annual results meeting, the management of ABC was also asked how to view the long-term downturn in stock prices. Zhang Qingsong, then president of the Agricultural Bank of China, said, "With the current stock price level, I personally believe that the Agricultural Bank is undoubtedly a potential stock and a value stock. ”
Zhang Qingsong introduced that the profitability of the Agricultural Bank of China is stable. Profit growth in 2019 was 51%, defective rate 140%, the cost-to-income ratio has declined for three consecutive years. In addition, ABC maintains a stable dividend ratio of 30%-32%, and shareholders can get a stable return on investment.
Zhang Qingsong also introduced that in the previous three years, the dividend yield of ABC's A-shares was 44%—5.7%, H shares even reached 49%-6.2%, which is a clear advantage compared with the rate of return on debt financial instruments in the market.
Low valuations and consistently high dividends are the distinguishing features of bank stocks. According to the author's statistics, even after the sharp rise in 2023, the dividend yield of large state-owned banks still significantly outperforms bank wealth management. As of January 10**, the dividend yields of ICBC, ABC, CCB and BOC were respectively. 91% and 574%。Among the A-share listed banks, including Zheshang Bank, Industrial Bank, Bank of Jiangsu and Bank of Nanjing, their dividend yields in 2022 exceeded 7%. In the same period, the level of bank wealth management income was generally 3About 5%.
Deposit rates and wealth management yields are falling, and some young people are also starting to set their sights on bank stocks. "I buy bank stocks as if they were money management. Some netizens posted their bank stock holdings, and said that in the past 3 years, not only have they paid dividends, but the bank's stock price has also increased by more than 10%.
Some people buy bank stocks and want to "pass it on".
However, few bank stock investors have seized this round of wealth and wealth of large state-owned banks.
Zhang Lei (pseudonym), the head of a private equity firm in South China that favors bank stocks, told the author that his institution has successively held a number of bank stocks such as China Merchants Bank, Industrial Bank, Ping An, Minsheng, Postal Savings, and Industrial and Commercial Bank of China.
Bank stocks are the main reason for our investment, with stable performance growth, substantial dividends, and significantly undervalued. Zhang Lei said that the hot topics in the market, such as consumption, new energy and other sectors, did not participate because of the high valuation.
However, most of the "undervalued" bank stocks have not ushered in the moment of value return, and their stock prices have been lying in the nest for a long time or even **. Zhang Lei said frankly that the income from holding bank stocks is "quite average", and the institutions only carry it in the middle of the year, and increase some ICBC holdings during the period to hedge.
There are still individual bank stocks, mainly because valuations are already very low. Zhang Lei said helplessly.
At a shareholder meeting of Minsheng Bank in 2019, the author saw an investor bring his junior high school child to the meeting. The investor said that he did not plan to sell after buying, and wanted to keep the bank shares and pass them on to his children. However, assuming that it has been held since the beginning of 2019, its holding** has exceeded 10% in 5 years.
Another investor complained to the author that he wanted to buy bank stocks and eat dividends, but he didn't expect to hold shares for 8 years, counting more than 40% of bank shares, which made him complain.
While many banks have significantly higher dividend yields than bank wealth management, the banking sector is heavily fragmented.
The big state-owned banks here are rising like a rainbow, while the star banks that were once highly sought after by investors, such as China Merchants Bank, Ping An Bank, and Bank of Ningbo, have plummeted. Since 2023, the share price of China Merchants Bank has exceeded 20%. In the same period, Ping An Bank** exceeded 30%, and Bank of Ningbo** nearly 40%.
The market once shouted "cherish the 40 yuan of China Merchants Bank", but as of January 10**, China Merchants Bank closed at 2805 yuan shares, which is close to halving from the highest point in June 2021.
In the past, shareholders did not favor the state-owned banks, mainly because of their huge volume, and the stock price needs a huge amount of capital to promote; The performance is stable but lacks imagination, and the capital market often gives higher valuations to the retail business and wealth management business of individual joint-stock banks and city commercial banks.
It can be seen from the price-to-book ratio trend chart of different types of banks in the past two years that the price-to-book ratio of large state-owned banks was originally at the bottom for a long time, and only began to bottom out in November 2022, and the price-to-book ratio of joint-stock banks and regional banks also increased during the same period. However, after three months, the price-to-book ratios of joint-stock banks and regional banks have slowed**, while the price-to-book ratios of large state-owned banks have continued to rise and have recently surpassed those of joint-stock banks and regional banks. It means that the capital market is more sought after and gives it a higher valuation. However, the banking sector as a whole is in a state of serious undervaluation of "broken net".
The price-to-book ratio of commercial banks in the past two years, according to wind
Wang Jian, chief analyst of Guoxin** financial industry, pointed out in the research report that when bank stocks fall to excessive undervaluation, the dividend yield is quite attractive, attracting funds to pursue absolute returns**, thus completing the bottom of the stock price. In May 2023, when bank stocks have been ** for half a year, they have recently been chasing high dividends again because of funds.
When it was severely undervalued in November 2022, the dividend yields of ABC and ICBC were once reached. 2%, and the 7-day annualized rate of return of Yu Bao in the same period was only 140%, and there are even investors who queue up for half a year only to deposit a large deposit with an interest rate of 3%. The attractiveness of bank stocks, especially large state-owned banks**, has increased significantly.
"Not optimistic, but too cheap".
At present, the operating pressure of the banking industry is greater than ever.
The first three quarterly reports of 2023 show that the profit growth rate of the four major banks of industry, agriculture, construction and China is only. 11% and 156%, and the profit growth rate has dropped sharply from the double-digit growth in 2021 and 2022. The profit growth of China Merchants Bank, Ping An, and Bank of Ningbo in the first three quarters of 2023 is respectively. 12% and 1255%。Better profit growth has not improved the valuations of joint-stock banks and city commercial banks.
Zhang Lei bluntly said that the main concern of the market is still the drag of real estate on banking and asset quality. In the overall fragile mood of the market, the rush of funds to large state-owned banks is one of the few safe-haven options. And once the market improves, the attractiveness of bank stocks will become significantly lower.
At the 24th UBS Greater China Symposium held on January 8, Yan Meizhi, head of financial industry research at UBS Greater China, said that due to the current weakness of consumer credit and wealth management, and the lack of stability in real estate, the valuations of some joint-stock banks and city commercial banks are declining.
Yan Meizhi said that from a fundamental point of view, he is not too optimistic about bank stocks. Mainly in the challenging macro environment, banks may need to make some sacrifices such as lower lending rates, fee reductions, or some special asset grace, in addition to the banking industry is facing risk factors such as real estate downturn, local ** debt resolution, etc., which have a negative impact on banks' profit growth and asset quality. However, bank stocks are relatively cheap, especially for large state-owned banks, and the Ministry of Finance, as its major shareholder, makes the dividends of large state-owned banks have a certain guarantee. As a result, large state-owned banks are considered to be resilient sectors and relatively attractive.
In the current operating environment, there is uncertainty about the dividends of individual banks. At the beginning of 2020, HSBC's share price plummeted when it was suspended by UK regulators, and investors were angry that "what's the point of non-paying bank stocks?" ”。
Bank of Zhengzhou has not paid dividends for three years, causing dissatisfaction among some investors. At the April 2023 earnings briefing, a number of investors** "denounced". The vice president of Bank of Zhengzhou responded that the bank has increased its assistance to small and medium-sized enterprises, and its profitability has been affected to a certain extent; In addition, the downward pressure on the economy has increased, and risks have continued to be exposed, so we have changed to comply with regulatory guidance and retained undistributed profits to further enhance risk resilience and improve capital adequacy.
In the past three years, Ping An Bank's dividend payout ratio has been around 12% of net profit, which is lower than the 30% ratio in the banking industry. On January 9, in response to investors' questions, the bank said that it would appropriately increase capital accumulation on the premise of ensuring the interests of shareholders to meet the needs of capital replenishment. In the future, if the conditions are met, we are willing to increase the dividend rate.
UBS said that in a weak environment, investors prefer value stocks with high dividends. In the short term, high dividends** can be an important allocation for defensive holdings. As corporate earnings continue to materialize, we will be more optimistic about growth stocks with a lot of room for flexibility in the future.
At the above-mentioned UBS Greater China Seminar, Lian Peikun, Director of Greater China Research at UBS Global Investment Bank, mentioned that many overseas long-term investment managers re-examine the opportunities in the Chinese market, and their starting point is that the valuation of the Chinese market is already too cheap. "Whether it's a developed market or an emerging market, it's hard to find an opportunity of 8x PE (price-to-earnings ratio). ”