The Zhitong Finance App learned that Changjiang Securities released a research report saying that the real estate policy accelerates the systematic valuation of bank stocks and repairs the current round of real estate policy levels, and the market will continue to observe and price the new real estate policy. If the real estate market stabilizes, it will support the systematic restoration of bank stock valuations. Currently, all bank stock PB valuations are in a “broken” state, and I am optimistic that Hakuba Bank stock valuations will rise back above 1.0 x PB. Regional cities and agricultural commercial banks will also fully benefit from the stabilization of regional property markets, which is essential for regional economic development, residents' credit needs, and asset quality.

At the individual stock level, we focus on recommending China Merchants Bank (600036.SH), which has both pro-cyclical and dividend leading attributes; we focus on recommending Changshu Bank (601128.SH), which benefits from procyclical logic to further enhance valuations; we also recommend Ruifeng Bank (601528.SH), Qilu Bank (), Bank of Xiamen (US), Bank of Chengdu (Singapore), Bank of Ningbo (002142.SZ), and focus on Bank of Hangzhou (System). 601665.SH 601187.SH 601838.SH 600926.SH Major state-owned banks are concerned about the high dividend value of H shares.

The main views of Changjiang Securities are as follows:

The level and strength of this round of real estate policy easing exceeded expectations

Changjiang Securities pointed out that since 2022, traditional White Horse Bank stocks such as China Merchants Bank have been dragged down by real estate and have been deeply adjusted. During this period, when there were important policy changes in the fourth quarter of 2022 and July 2023, stock prices all showed outstanding performance. Compared with the real estate policy at the end of August 2023, this round of policy lowered the down payment ratio to a record low and completely opened the lower limit of loan interest rates. At the same time, the central government's statement on eliminating the housing stock reflects the optimization of policy ideas and provides sufficient financial support for refinancing. Although the market is still divided on the current trend of the real estate sales cycle, expectations for further strengthening of subsequent policies have strengthened.

Mortgage interest rate cuts affect net interest spreads, but falling deposit costs ease the pressure. Currently, lower mortgage interest rate limits are fully liberalized. Each city can lower interest rates on its own; there is no need to lower LPR. Central bank data shows that interest rates for new mortgages issued in March have dropped to 3.69%, a sharp drop of 28 BP from month to month, mainly reflecting the 25 BP reduction in the 5-year LPR in February.

Currently, interest rates on newly issued mortgages are lower than corporate loans, and there is still room for decline as cities implement easing policies

Mortgage interest rate cuts are expected to be the main factor affecting net interest spreads in the future. After the central bank earlier disclosed that interest rates on stock mortgages were lowered in the fourth quarter of 2023, the adjusted weighted average interest rate for loans fell to 4.27%, and there is still a clear gap between newly issued interest rates. As the new policy is promoted in various regions, low interest rates on newly issued mortgages will become a common situation. The scale of mortgages continued to shrink in 2023, with only a slight increase of 5.1 billion yuan in the first quarter of 2024, which means that the amount of newly invested loans will continue to exceed maturity and repayment amounts, which will drive the stock yield to continue to decline.

Net interest spreads were supported by improvements in some factors. Interest rates on new loans issued by enterprises have clearly bottomed out and stabilized, and the supervisory authorities are no longer encouraging bank credit impulses. It is expected that interest rates will not decline significantly in the future. Among retail loans, there is still room for downside for products such as consumer loans with high interest rates, but interest rates on non-housing retail loan products of most large banks have continued to be fully adjusted. At the same time, deposit interest rates will begin to improve effectively this year, which is the core way to ease the pressure on net interest spreads in the future.

Stabilizing the real estate market is critical to improving asset quality

Changjiang Securities believes that the real estate defect rate for public loans rose sharply from 2021 to 2022, but the increase slowed in the second half of 2023. This may be due to the policy of deferring extension and the commencement of write-off and disposal at the same time, gradually absorbing the poor stock. However, in the second half of 2023, there was a marked increase in the non-performing ratio of real estate loans to public loans in regional banks that were less exposed to risk before, reflecting that risk pressure is still heavy.

Furthermore, attention should be paid to the impact of fluctuations in housing prices on the quality of operating loan assets. The scale of personal business loans has increased dramatically in recent years and is an important product for banks to develop inclusive finance. Operating loans secured by real estate may be affected by fluctuations in housing prices. If the value of collateral shrinks, it may theoretically have an impact on customer loan renewals, and we need to pay attention to the liquidity pressure of such customers. From a bank's perspective, the primary source of repayment, such as customer income, has always been the core of risk control, because there is currently no large-scale default pressure. However, if housing prices continue to be adjusted in depth, there is potential risk pressure, so stabilizing real estate is essential to improving the asset quality of operating loans.

Risk warning: Actual social financing demand continues to be sluggish; downward pressure on the economy increases, and the quality of bank assets deteriorates markedly.