In May, new loans totaled 1.89 trillion yuan, an increase of 392 billion yuan over the same period last year, higher than the 1.5 trillion yuan expected by the market. The loan stock increased by 11.0 percent year-on-year, up 0.1 percent from the previous month. In May, social finance increased by 2.79 trillion yuan, an increase of 837.8 billion yuan over the same period last year, higher than the 2.5 trillion yuan expected by the market, mainly due to an increase in government bonds and loans. The stock of social integration grew by 10.5%, an increase of 0.3 percentage points over the previous month.

Comment

Policy intensification and epidemic relief contributed to a higher-than-expected financial performance in May.On May 23, the people's Bank of China held a meeting on the analysis of the monetary and credit situation and proposed to "go all out to stabilize the basic economic market" and the policy signal was clear. We believe that the low rebound in the discount rate on bills in late May may indicate an acceleration in loan issuance.

In May, new RMB loans increased by 392 billion yuan compared with the same period last year, with an increase of 724.3 billion yuan in corporate loans and a decrease of 334.4 billion yuan in household loans. Look at it specifically:

1) among the public loans, the medium-and long-term loans to the public decreased by 97.7 billion yuan compared with the same period last year, indicating that the investment demand of enterprises was still weak, but the increase of 395.3 billion yuan less than that in April was alleviated; the discounted bills and short-term loans increased by 5591 / 328.6 billion yuan compared with the same period last year, reflecting the impulse phenomenon and the short-term capital turnover needs of enterprises.

2) among residents' loans, medium-and long-term loans increased by 104.7 billion yuan, a net decrease of 31.4 billion yuan compared with April, but still 337.9 billion yuan less than the same period last year, mainly due to the reduction of mortgage interest rates and the relaxation of the threshold for home purchase, but the demand is still weak; short-term loans increased by 184 billion yuan, compared with the net decrease of 185.6 billion yuan in April, a slight increase of 3.4 billion yuan over the same period last year, mainly due to the relief of the epidemic and the recovery of consumption.

Credit is expected to remain robust in June.After a sharp increase in credit in January / March this year, credit in February / April was significantly lower than expected. The rapid release of credit in May may advance part of the demand in June, but we expect it to remain robust in June for the following reasons:

1) April to May is usually the off-season, and the end of June is the peak season, and the volume is generally higher than the previous month.

2) the mitigation of the impact of the epidemic situation, vehicle freight volume and other indicators show that the resumption of work and production in Jiangsu and Zhejiang and other areas is accelerated, and the financing demand of enterprises is gradually restored.

3) the effect of the stable growth policy since the fourth quarter of last year has gradually emerged. Historical experience shows that the social integration pulse leads the economic expectation and the medium-and long-term loan growth rate of enterprises is about 6 months. Since the 4Q21, the social integration pulse has stabilized, indicating that economic expectations may gradually pick up in June-July, and the demand for capital expenditure will rise.

With the development of policy-oriented finance, the growth rate of infrastructure loans is expected to pick up.On June 1st, the National standing Committee proposed to increase the credit line of policy banks by 800 billion yuan to support infrastructure construction. Assuming that the loans of policy banks increase by 800 billion yuan in 2022 compared with 2021, the loan increase can reach 2 trillion yuan, accounting for 9.2% of the new loans in the banking industry for the whole year, which is significantly higher than the 5.8% in 2021, playing a role of cross-cycle adjustment.

In addition, 4Q21 government bond issuance accelerated, infrastructure investment growth bottomed out in April 2022, and the resumption of demand for 4Q21 infrastructure loans indicates that infrastructure loan growth may pick up in June-July 2022.

Real estate loan growth is expected to stop falling.The average mortgage interest rate in major cities has been cut by about 80bps since September 2021. The lower limit of mortgage interest rates in May, 20bps and LPR, 15bps, further open up room for interest rate reduction.

Under the stimulus of real estate relaxation policy, housing sales have rebounded month-on-month since mid-to-late May, and medium-and long-term loans for residents have changed from a net decrease to a regular one in May. We believe that the downward trend in mortgage loan growth is expected to ease.

In terms of public real estate loans, although banks' risk appetite is still low, the "stable stock" of development loans and the acceleration of M & A loans are expected to stabilize loan growth at around 0%.

Risk

The economic growth rate declined more than expected, and the impact of the epidemic was greater than expected.