On September 25th, bank stocks once again experienced a significant surge. According to Wind data, Zhengzhou Bank hit its upper limit early in the morning and closed up by 10.06%. By the end of the trading day, several banks including Qingdao Rural Commercial Bank, Shanghai Pudong Development Bank, Zijin Bank, Guiyang Bank, and Lanzhou Bank saw their stock prices increase by more than 4%.
Many industry insiders interviewed believe that the central bank's macro policy "combination punch" is beneficial for the profitability and asset quality prospects of banks, helping to stabilize the net interest margins of banks, among other things. Currently, the valuation of the banking sector is low, and coupled with the generally high dividends of banks, it still has a strong appeal for stable value investors.
Bank stocks have risen for two consecutive days, with the policy "combination punch" being favorable for stable interest margins.
Bank stocks had already collectively risen the day before, and today's trading saw the continuation of this collective upward trend. According to Wind data, the bank sector index (882115.W) has shown a significant increase over the past two days, with a total increase of 6.1%. Among them, Zhengzhou Bank's two-day increase exceeded 13%, Shanghai Pudong Development Bank's two-day increase reached 9.97%, and several banks including Qingdao Rural Commercial Bank, Huaxia Bank, and China Merchants Bank saw their two-day increases exceed 8%.
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The day before, at a press conference held by the State Council Information Office, the central bank governor Pan Gongsheng announced a number of monetary policies for the coming period, including interest rate cuts, reserve requirement ratio reductions, adjustments to existing mortgage loan interest rates, and the unification of mortgage down payment ratios. Two structural monetary policies will be introduced to support the development of the capital market. Li Yunze, the director of the China Banking and Insurance Regulatory Commission, also pointed out that there will be capital injections into large banks, support for banks' AIC equity investments, and the optimization of policies for micro and small enterprises to renew loans without principal repayment.
CICC analyst Lin Yingqi believes that the combination of financial policies sends a clear signal of stable growth and confidence, and while supporting the real economy and the capital market, it fully considers the impact on banks' interest margins and asset quality, helping to achieve symbiosis and mutual prosperity between banks' stable operations and the real economy.
"The capital injection into large banks helps to maintain stable growth in credit and enhance the ability to resist risks," Lin Yingqi said. The degree of dilution of dividends per share after the capital injection depends on whether the bank's profits can grow faster than the increase in shares. If banks promote the improvement of the real economy and reduce bank credit costs on the basis of stronger capital capabilities, the dilution effect on dividends per share will also be limited.
Zhou Maohua, a macro researcher in the financial market department of China Everbright Bank, also believes that the central bank has introduced a package of policies including interest rate cuts and reserve requirement ratio reductions. On the one hand, the central bank has increased the counter-cyclical adjustment of the economy, which has played a strong role in stimulating consumption and investment, and has enhanced the momentum of economic recovery, which will be beneficial for the prospects of bank profitability and asset quality. On the other hand, the central bank's interest rate cuts have guided the central market interest rate to move downward, which is also conducive to stabilizing the net interest margin of banks.
In response to mid-term risks, this round of policies will help improve the asset quality of banks.
Industry insiders generally believe that this round of policy "combination punch" will also help improve the asset quality of banks, especially in resolving the risks in the real estate market, the intensity is relatively large.Lin Yingqi believes that, overall, the three medium-term risk points that banks need to pay attention to within 6-12 months, namely the liquidity and asset quality of the real economy, the existing debt of the real estate, and the issue of residents' early repayment, have all been targeted in this round of policies, which will be key for the bank's fundamentals to observe the substantial effect of a series of policies on the improvement of long-term economic expectations.
In terms of real estate policies, the central bank not only proposed to reduce the existing mortgage loan interest rates and unify the minimum down payment ratio for the first and second homes, but also to extend the existing financing extension of real estate companies, the policy of operating property loans, and support the acquisition of existing land, etc.
Ming Ming, the chief economist of CITIC, said that on the demand side, reducing the existing mortgage loan interest rate on the basis of the LPR reduction will greatly improve the debt cost of homebuyers and reduce the pressure of early repayment; lowering the down payment ratio helps to stimulate the repair of real estate demand. At the same time, on the supply side, the support for affordable housing re-lending has increased, and the extension of the policy documents on operating property re-lending and financial 16 articles helps to improve the financing and operating environment of real estate companies, supporting the repair of the real estate industry.
"In recent years, the banking sector has withstood the impact of complex domestic and international economic environments, the operation of the banking sector has remained stable, internal governance has been accelerated, the asset-liability structure has been continuously optimized, and the risk control and operating quality of banks have steadily improved." Zhou Maohua expects that the domestic economy will show a good recovery trend, and the continuous improvement of corporate operating conditions is beneficial to the asset quality and profitability of banks.
Bank stock valuation is still low and there is still a valuation repair market
Although the bank stocks have performed well this year, in terms of price-to-book ratio, all 42 banks listed on the A-share market are in a "broken net" state. Among them, China Merchants Bank has the highest price-to-book ratio, reaching 0.9%, and 21 banks have a price-to-book ratio below 0.6%.
Zhou Maohua believes that as one of the cyclical industries, banks are expected to benefit. And the market sentiment continues to warm up, and the market is optimistic about the valuation repair market of banks.
"Since the beginning of this year, the bank sector has accumulated a lot of gains, but China's economy is in the early stage of recovery, and macro policies still maintain support. At present, corporate profits are expected to continue to improve, and banks actively optimize the asset-liability structure to stabilize the net interest margin, and the overall profitability and asset quality of banks are also expected to remain stable." Zhou Maohua further stated that the current valuation of the bank sector is still in a low state, but it has a high dividend, which still has a strong attraction for stable value investors.
In the research report, CICC suggested that investors choose banks with high dividends and stable asset quality, as well as banks with marginal improvement potential in performance and financing demands, and a not low dividend rate.
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