① Bank stocks rose in volume at the beginning of the year. Stock banks and Chengnong Commercial Bank led the industry today, and Rui Fung Bank hit ups and downs several times during the intraday period. ② Research institutes have analyzed that high dividend rates highlight absolute profit margins, and improved cost expectations are important reasons for the recent rise in bank stocks.
Financial Services Association, January 5 (Reporter Zou Juntao) Bank stocks continue to rise in volume. Following the record high of the Agricultural Bank's stock price yesterday, today the stock bank and the Chengnong Commercial Bank are relaying the lead in the industry.
On the morning of January 5, Ruifeng Bank's volume surged, hitting multiple intraday increases and stops; by the morning's close, Ruifeng Bank had risen 8.84%, with a turnover of 603 million yuan. In addition, many stock banks and urban commercial banks, such as China CITIC Bank, Bank of Suzhou, and Bank of Chengdu, also rose collectively.
A number of research institutes have analyzed recent bank stock fluctuations. A Financial Services Association reporter noticed that high dividend rates highlight absolute profit margins, and continued improvement in cost expectations are important reasons for the recent “agitation” in the banking sector.
Bank stocks collectively staged a “good start” in the first week of the year
Since the beginning of the year, the banking sector has reversed its previous decline, and collective performance has been active. First, some state-owned banks continued to strengthen, then there were stock banks, etc., leading the rise.
On January 4, Agricultural Bank's stock price closed at 3.77 yuan/share, an increase of 1.34%. It is worth noting that the bank once rose to 3.78 yuan/share during the intraday period, the highest price since listing. The data shows that since 2023, the Agricultural Bank has increased by 40%.
In addition to the Agricultural Bank, the stock prices of state-owned banks such as the Industrial and Commercial Bank, Bank of China, China Construction Bank, and Bank of Communications also “flourished all the way” at the beginning of the year. According to market data, as of the close of trading this morning, the stock prices of the five major banks, including China Agriculture, Industry and Construction, had risen by 3.79%, 3.3%, 2.93%, 2.92%, and 3.66% respectively in the first week of the opening year.
In addition to major state-owned banks, stock banks and urban agricultural commercial banks have also been active. Market data shows that on January 5, urban agricultural commercial banks and stock banks began to rise one after another, becoming “leaders” in the entire banking sector. As of the close of trading this morning, in addition to Ruifeng Bank's outstanding performance, stocks of 12 banks, including China CITIC Bank, Bank of Suzhou, Bank of Chengdu, Ping An Bank, Bank of Ningbo, and China Merchants Bank, had also risen by more than 2%.
· Screenshot (partial) of bank stock performance at the close of the morning of January 5 Source: Tonghua Shun
According to Tonghuashun data, as of the morning's close, out of 42 A-share listed banks, only Agricultural Bank closed down; the overall banking sector index rose 1.95%.
Industry: Higher dividend rates and improved cost expectations boosted stock prices
The banking sector performed well at the beginning of the year, which is no surprise to the industry. A CIFA reporter learned from a market research agency that this is mainly related to two factors. On the one hand, the absolute profit margin brought about by high dividend rates on bank stocks is highlighted; on the other hand, further lowering deposit interest rates enhances expectations for cost improvement.
Ping An Securities said that as of the end of December 2023, the dividend rate in the banking sector was 5.97%. The dividend rate was at an all-time high relative premium compared to risk-free interest rates, and dividend attractiveness continued to increase. Since the excessive earnings performance of bank stocks in history mostly occurred during the upward phase of economic sentiment, the agency said that the upward flexibility of the sector still needs to pay attention to improving economic expectations. However, it should be noted that as a high-dividend type that can provide steady dividends, the fixed income allocation value of bank stocks is also worth paying attention to when risk-free interest rates continue to decline. Currently, the static PB of the sector is only 0.52 times, and the corresponding implied defect rate exceeds 15%, and the margin of safety is sufficient.
Furthermore, in December of last year, major state-owned banks announced a reduction in deposit listing interest rates, 0.1% for one-year or less full deposits, 0.2% for two-year full deposits, and 0.25% for three-year and five-year full deposits. Stock banks such as China Merchants Bank followed suit.
Caixin Securities said in this regard that the third round of deposit interest rate cuts between state-owned banks and stock banks has begun in 2023, which is expected to drive small and medium-sized banks to follow the cuts. Cost expectations in the banking sector will improve, which is expected to ease the pressure on net interest spreads. Furthermore, as the risk-free interest rate center continues to decline, the absolute profit margin brought about by banks with high dividend rates has been further highlighted, focusing on the allocation value of the sector as a high-dividend asset. The current valuation fully reflects pessimistic expectations. In the future, as stock risks are cleared and the economy recovers for the better, it is expected to drive bank valuation repair.
Donghai Securities also pointed out that the scope and pace of interest rate cuts on early deposits is stronger than expected, and is expected to ease the pressure on interest spreads to a large extent and further reduce financing costs for entities. The net increase in PLS scale of policy banks by 350 billion yuan in December reflects the further strengthening of monetary and fiscal policies. These positive policies are conducive to macroeconomic recovery.