On February 21, the Shanghai Composite Index hit a "six consecutive positives". In the rapid repair of the market, the large financial sector performed outstandingly, and many such as Ping An Bank and Hongta achieved intraday limits. Taking the A-share banking sector as an example, the share prices of 41 listed banks**, Agricultural Bank of China and Bank of China hit a new high.
A number of senior brokerage analysts told the brokerage China reporter that the sharp rise in the banking sector may be related to the unexpected adjustment factors of LPR (loan market ** interest rate) of more than 5 years, and the interest rate cut is beneficial to economic expectations and asset quality, which will help boost market expectations and benefit bank valuation.
From a fundamental point of view, the 2023 performance reports disclosed by the nine listed banks before the Spring Festival show that the net profit of these banks generally recorded positive year-on-year growth, while the asset quality also continued to improve, sending a positive signal.
Ping An Bank's daily limit, the stock prices of many major banks hit new highs.
On February 21, the banking sector as a whole achieved rapid **, and Ping An Bank achieved a daily limit in the intraday, closing at 108 yuan shares, with a turnover of 5.3 billion yuan, ranking 7th in the A** market, and the total market value of the bank has returned to about 210 billion yuan.
In addition, another 11 banks** exceeded 3%, including Bank of Ningbo**745%, Qilu Bank rose 609%, China Merchants Bank rose 583%。Overall, some of the ** surges fell back after midday, of which the main net inflow of the banking sector reached 585.8 billion yuan, ranking second among the 31 Shenwan first-class industries.
With the sharp rise in the sector, the stock prices of many major state-owned banks have reached new highs. Among them, the Agricultural Bank of China and the Bank of China touched 423 yuan, 464 yuan, the latest total market value is about 143 trillion yuan and 12 trillion yuan, the market value hit a new high since listing. In addition, Bank of Communications' A-shares reached an intraday high of 646 yuan shares, a new high since January 2008, China Construction Bank and Industrial and Commercial Bank of China A shares also hit the highest in the past 6 years.
Analyzing the performance of the banking sector this year, unlike the top gainers in 2023, all of which are large state-owned banks, among the top 10 banks with cumulative gains so far, small and medium-sized banks are the majority, while large state-owned banks are second.
Specifically, China CITIC Bank has risen by 242%, China Merchants Bank, Bank of Chengdu, Bank of Nanjing, Bank of Jiangsu, Bank of Beijing and Bank of Changsha, a total of 7 banks, rose by more than 15%. In addition, the remaining 35 listed banks have risen by 284% to 1484%.
Judging from the news, on February 20, the LPR with a maturity of more than 5 years was lowered by 25 basis points (BP) to 395%, the larger-than-expected downward adjustment has boosted market confidence in stabilizing growth, stabilizing real estate, and promoting financing. In addition, the growth rate of social finance in January, which was previously disclosed by the central bank, also achieved a "good start", exceeding market expectations and further boosting market confidence.
For Ping An Bank, which achieved the daily limit on the same day, according to a brokerage China reporter recently learned that in the company's financial module, Ping An Bank abolished the industry division system that had existed for many years: the original real estate, green finance, infrastructure, automotive ecology, electronic information and intelligent manufacturing, medical health, cultural tourism six industry divisions, merged into a strategic customer department. As a result of this change, the Corporate Finance module has become composed of Transaction Banking Department, Corporate Business Management Department, Investment Banking Department, Institutional Supervision Team, Cross-border Finance Department, Strategic Client Department, and Settlement and Cash Management Department.
With the adjustment of the organizational structure, some senior executives of Ping An Bank's head office have changed, and a large number of room-level management cadres of some departments have also changed, and the team members of several branches have also been greatly adjusted. Ji Guangheng, Secretary of the Party Committee and President of Ping An Bank, said at the 2024 bank-wide work conference that "empowering the head office and fulfilling the main responsibility of branch operations" is the key direction of Ping An Bank's transformation and upgrading.
The first batch of performance reports: asset quality continues to improve.
From a fundamental point of view, the bank performance report also sends a positive signal.
Up to now, the number of A-share listed banks that have released their 2023 performance reports has increased to 9. According to the Chinese reporter of the brokerage, the net profit growth rate of the nine listed banks that have disclosed the performance express report has generally recorded positive year-on-year growth, with an increase of between 6% and 24%.
It is worth mentioning that the net profit attributable to the parent company of four banks, Bank of Hangzhou, Qilu Bank, Bank of Qingdao and Bank of Ningbo, increased by more than 10% year-on-year. Among them, Bank of Hangzhou even increased by 23 percent year-on-year15%, maintaining a high growth rate in recent years; Qilu Bank's net profit also increased by 1802%, in addition, Bank of Qingdao and Bank of Ningbo increased by 1511% and 1066%。
Asset quality is generally improving, which is a positive signal from the 9 annual performance reports of listed banks that have been released so far.
Overall, except for Bank of Lanzhou and Bank of Ningbo, the non-performing loan ratio increased slightly from the end of the previous year (both increased by only 0.).01 percentage point), and the remaining 7 banks all achieved a decrease in NPL ratio.
Among them, the non-performing loan ratio of China CITIC Bank is 118%, down 009 percentage points, the largest decline; The non-performing loan ratio of Qilu Bank and Bank of Qingdao is as follows. 18%, down 003 percentage points; Bank of Hangzhou, Bank of Changsha, China Merchants Bank and Bank of Xiamen decreased by 001 percentage point.
In January this year, the relevant person in charge of the State Administration of Financial Supervision said that in 2023, the asset quality of the banking industry will remain stable overall. According to preliminary statistics, at the end of 2023, the balance of non-performing loans of banking financial institutions will be 395 trillion yuan, an increase of 149.5 billion yuan from the beginning of the year, and the non-performing loan ratio was 162%；The ratio of loans overdue for more than 90 days to non-performing loans of commercial banks was 842%, which remains at a low level; Disposal of non-performing assets of 3 trillion yuan throughout the year, maintaining disposal efforts; The ability to offset risks is sufficient.
Institutions: Policies are favorable for bank valuation repair.
Under the combined effect of policy and fundamentals, the valuation repair of listed banks has ushered in a positive situation.
For the LPR downgrade, a chief analyst of the banking industry of a leading brokerage told the Chinese reporter that from the perspective of fundamental logic, the core contradiction of bank valuation is economic expectations and asset quality, rather than interest rate differentials. The current rate cuts, while bad for spreads, are good for economic expectations and asset quality, so they are good for valuations.
Wang Jian, chief analyst of the banking industry at Guosen, told the Chinese reporter that the current trend of bank stocks can be seen from the perspective of changes in "banking industry profits". The logic of this method is relatively straightforward: "bank profits, industrial profits" have an inverse relationship with the bank's stock price - that is, the ratio **, the bank's stock price will fall; Conversely, if the ratio falls, the bank's stock price will be **.
In the current context, the lower the proportion of bank performance to GDP, the better the stock price performance will be, Wang Jian called it the "silver G ratio", that is, the current "silver G ratio" has fallen, so bank stocks have room to repair.
According to a research report released by Ma Kunpeng, chief analyst of the banking industry of China Securities Construction Investment, the timing of the LPR cut in February was in line with expectations, and the 5-year cut exceeded market expectations. The policy combination of "1-year unchanged + 5-year downward adjustment" is conducive to stimulating the improvement of real estate demand and supporting the macro economy on the one hand, and on the other hand, it reflects the attitude of the policy to protect bank interest margins.
According to the above-mentioned research report, the negative sentiment in the market has been greatly dispelled, which is good for bank valuations. In terms of the impact of interest margins, as most mortgages have been repriced in January, the impact of the 5-year LPR cut on banks' net interest margins in 2024 is negligible, and it is expected that the net interest margin of banks in 2024 will still narrow better than last year, considering the hedging effect of the deposit rate cut at the end of 2023.
Guotai Junan** analyst Zhang Yu's team research report believes that the interest rate cut will help boost market expectations and promote the further recovery of demand by exchanging price for volume. On the residential side, the decline in LPR with a maturity of more than 5 years will reduce the pressure on monthly mortgage payments and improve the trend of early repayment, and on the other hand, it will also help stimulate the demand for home purchases. On the enterprise side, the decline in LPR with a maturity of more than 5 years will be transmitted to the actual loan interest rate of enterprises, reducing the medium and long-term financing costs of enterprises. Interest rate cuts have landed, and the policy environment of easy credit and stable growth is conducive to investment in the banking sector.
Editor-in-charge: Ren Haopeng |Review: Li Zhen |Supervisor: Wan Junwei.
*: Brokerage China).