The A-share market is about to usher in the end of the semi-annual market. The reporter of “Popular Securities Daily” noticed that as of the time of writing, the bank (CITIC) index rose slightly by 2.04% during the year, ranking 14th among the 30 CITIC industry sectors. It is worth mentioning that under the catalysis of the concept of “China Special Evaluation”, the state-owned banking sector performed well during the year, and the Bank of China, Agricultural Bank, Bank of Communications, and China CITIC Bank all increased by more than 20%. But at the same time, many bank stocks also experienced relatively large declines. Among them, Bank of Lanzhou was at the bottom with a decline of more than 20%, and Bank of Ningbo, Bank of Chengdu, Bank of Nanjing, and Bank of Suzhou also fell by more than 10%.
Looking forward to the second half of the year, the reporter found that securities companies generally believe that the overall valuation of bank stocks is still at a low position. It is expected that in the second half of the year, with the stabilization of interest rate spreads and other factors, the year-on-year growth rate of listed banks’ operating income and net profit will pick up. , the value revaluation market may have just started.
The trend of bank stocks during the year has “twists and turns”
Looking back at the overall trend of bank stocks during the year, it can be described as “twists and turns”.
From the beginning of the year to the end of January, driven by policy stimulus and economic stabilization, banking stocks continued their valuation recovery since November last year, with an overall increase of over 4%. , Superimposed economic recovery is not as expected, capital outflows and other factors, the sector has experienced an overall correction, falling more than 7%; from early April to early May, the “China special assessment” market spread to bank stocks, driving the banking sector to rise by 13%, Bank of China, Major state-owned banks such as Agricultural Bank of China and Bank of Communications and China CITIC Bank have seen significant gains; since mid-May, due to the weakening of economic expectations again and the addition of risk factors such as urban investment, the sector has returned to correction, with a decline of about 6%.
“The ‘twists and turns’ of the banking sector market reflects the market’s fluctuations in macroeconomic expectations.” Ma Tingting, a banking analyst at Guosheng Securities, pointed out that in the future, the main focus will be on macro policy changes, including the implementation of stimulus policies to further stabilize growth and expand domestic demand (such as real estate demand. Marginal relaxation of end policies, further increase in stimulating consumption, etc.), is expected to form a positive catalyst for the sector.
From the perspective of individual trends, the most prominent feature in the first half of this year is the performance differentiation between large banks and small and medium-sized banks. The data shows that two types of banks performed better in the first half of this year. One is undervalued, high dividends, state-owned large banks and China CITIC Bank related to the restoration of the value of central state-owned enterprises, and the other is individual stocks that have risk clearance and improvement expectations. Such as Minsheng Bank, Huaxia Bank, Yu Rong Commercial Bank, Bank of Beijing, etc. In contrast, heavy stocks of traditional institutions that are strongly related to economic expectations, such as Bank of Ningbo, have seen a significant correction, with a year-to-date decline of more than 18%.
“Looking forward to the second half of the year, the uncertainty of the economic situation still exists, but considering that the current valuations of listed banks imply sufficiently pessimistic expectations for real estate and the economy, we believe that we can be more positive about bank stocks.” Wu Kaixiang, an analyst at Orient Securities, pointed out.
The decline in interest rate spread is expected to slow down marginally
The sharp narrowing of the interest rate spread is considered to be the most direct reason for the decline in operating income and net profit of commercial banks.
According to statistics from China Merchants Securities, the net interest margin of commercial banks in the first quarter of this year was only 1.74%, a year-on-year decrease of 23BP, and a decrease of 17BP from the fourth quarter of last year. The parent company’s net profit growth rate was 2.37%, which was the lowest in recent years. Among them, state-owned large banks narrowed the most, with a net interest margin of 1.69%, a drop of 21BP from the fourth quarter of last year; followed by joint-stock banks, with a net interest margin of 1.83%, narrowing by 16BP; city commercial banks saw a smaller decline, with a net interest margin 1.63%, narrowing only 4BP. “Due to the relatively high proportion of mortgage loans of large banks, the follow-up may continue to face the impact of early repayment.” Liao Zhiming, an analyst at China Merchants Bank, predicts that the overall profit growth rate of A-share listed banks may be around 3% throughout the year, and the growth rate will be 2015. lower level since.
So, will the interest rate spread be even lower after reaching historical lows? Xiao Feifei, chief analyst of the banking industry at CITIC Securities, pointed out in the investment strategy report for the second half of the banking industry that the decline in the bank’s net interest margin is the result of both the asset side and the liability side. Due to the low interest rate spread, it is expected that the decline in interest rate spreads will still have inertia, but she also pointed out, “After the second quarter, positive factors will slowly exert force, and the downward trend in interest rate spreads is expected to gradually narrow. From the perspective of both ends of comprehensive assets and liabilities: on the asset side, The impact of stock re-pricing has weakened, and the pricing of new loans has stabilized; on the liability side, the cost-saving effect of deposits continues to be released, and inter-bank liabilities seek a balance between volume and price. Overall, subsequent interest rates and other related policies will be key variables in the trend of interest rate spreads.”
Lu Liting, an analyst at Dongguan Securities, also pointed out that the current economy continues to recover, the effect of stabilizing growth policies is showing, market confidence and domestic demand are gradually picking up, and there are more positive factors supporting the stable operation of net interest margin. The period of the largest decline has passed, and the decline in the industry’s net interest margin is expected to slow down marginally.”
The allocation of the banking sector is at the right time
Despite the impact of the epidemic, the trend of continuous decline in bank non-performing ratios has continued. According to statistics from Haitong Securities, as of the end of the first quarter of this year, the non-performing ratio of banks has dropped for 10 consecutive quarters. “If the non-performing rate continues to decline throughout 2023, we believe that the market may begin a revaluation of the banking sector.” Sun Ting, an analyst at Haitong Securities, said that with the end of the three-year epidemic and the decline in interest rate spreads, the “boots landed”. Under policy optimization, the bank valuation center is expected to be repaired upwards. “At present, the bank’s PE/PB is still at a historically low position, the dividend rate is at a high position, and the investment value is prominent. In the second half of the year, we can focus on the opportunity of the mid-term report/third-quarter report; at the same time, if economic work-related meetings focus on the theme of stable growth, It could also be a potential positive.”
Another data shows that as of the end of the first quarter, the proportion of bank stocks held by active public funds was 2.13%, which was only higher than the historical low of 2.03% in 2016. Based on this, Li Shuang, an analyst at Essence Securities, said that considering that bank valuations and institutional holdings have reached a low historical quantile level, they can be more positive about bank stocks. Specifically, he suggested a dumbbell-shaped allocation strategy, that is, “short-term emphasis on ‘medium and special estimates’, low-end stocks with high dividends, large state-owned banks represented by Postal Savings Bank; elastic stocks that focus on economic recovery in the medium and long term, such as China Merchants Bank, Ping An Bank, Bank of Ningbo.”
Yuan Zheqi, chief analyst of the banking industry at Ping An Securities, also said that considering the current static PB of only 0.58 times in the banking sector and the corresponding implied non-performing rate of 15.3%, the margin of safety is still high. Looking at the whole year, the recovery of residents’ consumption propensity and risk appetite may become a catalyst for the recovery of the sector’s profitability, maintaining the “outperform” rating of the banking sector. “In the long run, we believe that the α market of regional banks will continue to perform, and individuals with outstanding profitability and growth still deserve the market’s attention. We conduct an all-round analysis of regional banks from the dimensions of profitability, growth, and asset quality. For comparison, it is recommended to pay attention to high-quality leaders such as Bank of Ningbo, Bank of Changsha, Bank of Suzhou, Bank of Jiangsu, and Changshu Bank.”
(Article source: Public Securities News)
Article source: Public Securities News
Original title: Institutions discuss the investment strategy of bank stocks in the second half of the year: the value revaluation market may just start
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