The Zhitong Finance App learned that in the context of narrowing interest spreads, Guangfa Securities released a research report saying that against the backdrop of narrowing interest spreads, the banking sector's performance growth rate is still bottoming out. The scale expansion sector is still relatively fragmented. Stock banks are still expanding relatively slowly, overall asset quality has remained steady, bad rate indicators have continued to improve, and provision coverage has declined somewhat to feed back profits. At this stage, bank stocks place more emphasis on stable asset quality and future profit expectations. It is recommended to focus on stock banks and regional banks with a lot of early adjustments, excellent asset quality, and sustainable endogenous capital. Continue to be optimistic about China Merchants Bank (600036.SH), Bank of Hangzhou (600926.SH), Bank of Suzhou (002966.SZ), Bank of Nanjing (601009.SH), Shanghai Agricultural Commercial Bank (), etc. 601825.SH

Incident: On February 21, 2024, the China Financial Supervisory Authority released data on the main regulatory indicators of the banking industry for the fourth quarter of 2023.

The review of GF Securities is as follows:

Performance: The profit level of the industry declined.

The net profit growth rate of commercial banks in 2023 was 3.2%, and ROE and ROA were 8.35% and 0.64% respectively, falling 0.98 pct and 0.12 pct, respectively. By sector, the data caliber of Chengnong Commercial Bank may be adjusted, causing disturbances to the performance growth rate. Overall, the net profit growth rate of Chengnong Commercial Bank is relatively high. The low performance base is also expected to be a major influencing factor due to fluctuations in the Q4 bond market in '22. The state-owned sector's performance growth was steady, but it declined in a single quarter in 23Q4; the net profit growth rate of stock banks continued to decline year-on-year, and the performance was still under pressure.

Scale: The growth rate of non-credit assets rebounded in 23Q4.

The year-on-year growth rates of commercial banks' total assets and loans in 2023 were 11% and 10.85% respectively, with changes of +0.5pct and -0.16pct respectively from the previous three quarters. The asset growth rate of commercial banks continued to pick up month-on-month in Q4 in '23, but the growth rate of loans declined slightly. It is expected that 23Q4 government bonds will be issued more vigorously. Banks have accepted some investment in government bonds, and the growth rate of non-credit assets has rebounded. By sector, the credit growth rate of state-owned banks is still high, the credit growth rate of stock banks is still low, and the dependence on non-credit asset expansion may still be high.

Interest spreads: Continue to narrow, and follow up on fiscal strength and debt costs.

The net interest spread of commercial banks in 2023 was 1.69% (-3 bps month-on-month). On the asset side, loan yields have yet to stabilize; on the debt side, it is expected that deposit costs will be rigid, and second, that capital levels will be tight in the fourth quarter, and active debt costs may rise. Looking ahead to 2024, it is expected that interest spreads will still be under some pressure. The asset side will be affected by loan repricing and LPR cuts. Follow-up attention will be paid to whether fiscal strength can be followed up and economic recovery; on the debt side, interbank liquidity is relatively abundant, and active debt costs are expected to gradually fall. Pay attention to the outflow of excess savings from residents and the results of last year's three-round deposit interest rate cuts.

Asset quality: Maintain stability and pay attention to agricultural and commercial bank risks.

At the end of 2023, the non-performing loan ratio of commercial banks decreased by 2 bp/4 bp month-on-year; the interest rate changed by +1bp/-4 bp; the provision coverage rate changed -2.75pct/-0.71 pct, the overall asset quality of the industry was stable, the non-performing ratio of the Chinese stock bank continued to decline quarterly, and the provision coverage rate declined slightly, which is expected due to considerations of performance and capital supplementation; agricultural and commercial banks are still under pressure to monitor subsequent risk exposure.

Risk warning: 1) Economic growth has declined beyond expectations; 2) fiscal policy has fallen short of expectations; 3) international economic and financial risks have exceeded expectations; 4) Policy regulation has exceeded expectations.