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中信证券:银行景气低位运行 静待预期修复

CITIC Securities: The low level of banking conditions is waiting for expectations to be repaired

Zhitong Finance ·  11/05/2023 17:00

The Zhitong Finance App learned that a research report released by CITIC Securities said that judging from the three-quarter report, the overall performance growth rate of A-share listed banks has slowed, net interest-end interest spreads are still under downward pressure, and the non-interest-end investment business and intermediary business in the third quarter were also greatly affected by the market. However, the overall asset quality of the banking industry was running steadily, and the industry's credit costs continued to be reduced. Looking ahead, the bank believes that it is still at the stage where the policy environment is warming and economic momentum is being stored, and sector uncertainty is expected to decline, and expectations are repaired.

In terms of individual stocks, recommendations:1) The return on investment brought about by performance growth and valuation positions is clear. It mainly includes institutional heavy banks with strong certainty in performance growth over the next three years and valuations falling back to a low level; 2) valuation restoration where individuals have entered an inflection point cycle in asset quality; and 3) large banks benefiting from capital market policies.

The main views of CITIC Securities are as follows:

The economy is running at a low level, and income has yet to be repaired.

1) Industry operation: revenue decline, profit stability.The operating income and net profit of A-share listed banks in the first three quarters were -0.8%/+2.6% year-on-year (+0.5%/+3.5% in the first half of the year), respectively. Preparation factors for the third quarter made up for the adverse effects of the decline in revenue to a certain extent;

2) Profitability factors: Spending savings offset declining revenue。 Net interest income in the first three quarters was -2.0%/-5.7% compared to intermediary business revenue. Increased marginal pressure was mainly affected by a combination of quarterly interest rate cuts and market volatility factors. Asset impairment losses were -11.3% year-on-year, which became the main factor supporting the generally stable profit growth rate;

3) Individual banks: The trend of differentiation continues.The profit growth range of listed banks in the first three quarters was [-30.8% ,26.1%] (in the first half of the year [-23.3% ,27.2%]). Differences in revenue-side performance and differences in provision margin became core variables. In comparison, some large banks and regional banks showed greater operating resilience.

Net interest income: The expansion rate has subsided, and interest spreads have continued to decline.

1) Volume: The overall pace of table expansion has subsided.At the end of the third quarter, the total assets of the 42 listed banks increased by 0.9% on a quarterly basis, down 0.9 pct from the same period last year, and the pace of expansion moderated. Looking at the structure, the listed banks focused on credit and investment in the third quarter, and the sharp negative growth in interbank assets during the quarter may be related to tightening liquidity at the end of the quarter. Individually, the expansion of banks in some regions is relatively active, and the asset growth rate of stock banks is relatively slow.

2) Price: Interest spreads in the industry continue to decline.According to the average method at the beginning and end of the period, the net interest spread of listed banks in the third quarter continued to decline by 4 bps. Among them, the yield on interest-bearing assets continued to decline by 1.4 bps in a single quarter, mainly affected by the continued decline in market pricing; the cost ratio of interest-bearing debt continued to rise by 3 bps in a single quarter. In addition to deposit regularization, some banks were also affected by US dollar interest rate hikes.

Non-interest-bearing business: All sectors have declined.

1) Overall situation: The year-on-year growth rate continued to decline。 The non-interest-bearing business revenue of listed banks in 2023Q3 was +2.8% year-on-year, and the quarterly non-interest revenue growth rate was -4.4%. Fee income and other non-interest income are under pressure.

2) Intermediate business: Fees have been reduced, and the decline has increased.Net income from fees and commissions of listed banks in the first three quarters grew by -5.7% year-on-year (-4.2% in the first half of the year), mainly due to fluctuations in capital market performance in the third quarter of this year and continued implementation of fee cuts, and slow progress in the recovery of intermediary business.

3) Other non-interest income: Interest rate fluctuations affect investment income。 The year-on-year growth rate of other non-interest income of listed banks in the first three quarters was +16.3% (22.6% in the first half of the year). The capital side was tightened under the acceleration of government bond issuance, which had an impact on investment business performance. At the same time, the 2022 non-interest income base was lowered due to adjustments in the accounting standards of major banks, which was relatively fully released in the first half of the year, and the supporting effect also weakened.

Asset quality: steady operation, provision for consolidation.

1) Book indicators: Poor and steady books, and broad credit differentiation.At the end of 3Q23, the weighted average non-performing rate of listed banks remained flat compared to the second quarter. Among them, 14/42 listed banks' non-performing loans improved month-on-month; in terms of broad asset quality, 17/33 listed banks paid attention to the month-on-month improvement in loan ratios. Among them, under stricter perceptions and regional differentiation, the attention rate of some banks increased, and individuals were further divided.

2) Credit costs: Steady improvement to protect profits.The broad credit cost of banks listed in 3Q23 was 0.40%, down 0.13pct/0.20pct from the same month-on-month period, respectively. As asset quality is consolidated, the credit cost savings effect will continue to be unleashed. It is expected that credit costs will further improve in the next stage, effectively feeding back profits.

3) Compensatory capacity: Reserve coverage maintains a high level, and individuals continue the logic of differentiation.At the end of 3Q23, the impairment losses of listed banks were -10.20% year-on-year, further releasing profits. The provision coverage rate was -3.9pcts to 315.3% month-on-month, maintaining a high consolidation trend of 300% +. Among them, individual provision strategies were further diversified, and the impairment and backfeed of urban commercial banks strengthened while provisions were more stable, and the performance was relatively impressive.

Risk Factors:Macroeconomic growth has declined sharply; bank asset quality has deteriorated beyond expectations; and regulatory and industry policies have changed beyond expectations.

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
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