In early trading today, bank stocks rose as a new force. As of noon, the half-day turnover of the banking sector exceeded that of the whole day yesterday. Individual stocks rose across the board without falling, of which the Bank of Chengdu rose 8.66%. It was closed several times in intraday trading, with Hangzhou Bank, Changshu Bank, China Merchants Bank, Ping an Bank and so on leading the gains. Strongly driven by bank stocks, the main A-share index was also red across the board, and the Shanghai Composite Index once broke through the 3400-point integer mark in intraday trading.

Bank boots fall to the ground

According to second-quarter banking data released by the Bancassurance Regulatory Commission yesterday, commercial banks made a cumulative net profit of 1 trillion yuan in the first half of the year, down 9.4% from a year earlier, with an average capital profit margin of 10.35%. The average asset profit margin of commercial banks was 0.83%, down 0.15 percentage points from the end of the previous quarter.

There are three main reasons for the decline in bank net profit in the first half of the year: 1. Affected by the epidemic, the repayment of principal and interest on some bank loans has been postponed, affecting the bank's revenue; 2. In order to support and serve the real economy, bank-side lending rates are also falling. 3. While revenue is affected, the cost of banks is also rising, which mainly reflects the rise of bank credit risk and the increase of non-performing loans, which requires more provisions, which is a deduction of profits.

Although the banking sector's first-half figures are not very good, there is also a potential catalyst for bank stocks to rise. First of all, medium-and long-term incremental funds have entered the market, and since the beginning of this year, regulatory authorities have repeatedly promoted social security funds, insurance funds and other medium-and long-term funds to enter the market. According to the latest data from the Bancassurance Regulatory Commission, as of April this year, the balance of insurance funds was 19.61 trillion yuan, an increase of 5.82% over the end of last year. Among them, the size of stocks and securities investment funds was 2.67 trillion yuan, accounting for 13.60 percent, an increase of 0.44 percent over the end of last year. If the proportion of insurance fund equity investment is calculated according to the "30% upper limit to 40% upper limit", it can theoretically bring about 800 billion yuan of long-term incremental funds for A-shares.

Second, the economic sustainability is better than expected. In the second quarter, China's economic growth changed from negative to positive, with a year-on-year growth of 3.2%. It is the only major economy with positive growth in the world, showing the strong resilience of China's economy. Yi Gang, governor of the central bank, believes that the characteristics of China's economy with great potential and resilience have not changed. He predicted that China's economic growth will continue to recover in the second half of the year and is expected to achieve positive growth for the whole year. As an industry highly related to macro-economy, the performance of banks is bound to improve with the improvement of macro-economy.

In addition, bank stocks are currently the most undervalued sector in the market. As of midday, the average price-to-earnings ratio of the banking sector was less than 6 times, the lowest, China Minsheng Banking Corp, only 3.7 times, the Bank of Beijing, Industrial Bank price-to-earnings ratio of less than 4 times, Bank of Communications, Jiangsu Bank and other 11 shares price-to-earnings ratio of less than 5 times, the highest Ningbo Bank price-earnings ratio of only 12.7 times.

The price-to-book ratio is also terrible, with an average price-to-book ratio of about 0.7 times. Of the 36 listed banks, 27 are clean, with a net failure ratio as high as 75%, which is the sector with the highest breakage rate. Huaxia Bank, which has the lowest price-to-book ratio, is only 0.47 times, and the highest Ningbo Bank is only 2.09 times, which is the only bank stock with a price-to-book ratio of more than 2 times.

Therefore, the banking data for the first half of the year is not ideal, but is considered by the market to be boots landing, taking advantage of the opportunity to intervene in bargain hunting. Since August, financiers have bought 382 million yuan from Societe Generale, 296 million yuan from Industrial and Commercial Bank of China, 212 million yuan from Ping an Bank, and more than 100 million yuan from Chengdu Bank, Bank of Communications, and Ningbo Bank. Northward Capital has also bought 230 million yuan from Industrial Bank, 140 million yuan from Pudong Development Bank, 135 million yuan from Chengdu Bank and 127 million yuan from Bank of China Ltd. since August.

Institutions: plate to meet the allocation opportunity

Huaxi Securities pointed out that the negative increase in commercial bank profits in the first half of the year was in line with expectations. On the one hand, spreads performed relatively well in the second quarter, with only a drop in 1BP in the second quarter, but the follow-up is not sustainable, with the landing of policies to further reduce entity financing costs, and with a slight increase in the marginal tightening of market liquidity, the pressure on the debt side will increase in the future; on the other hand, in the regulatory orientation of "solid + increased disposal + prudent provision", the industry is bad and the recovery rate is stable. The indicators of various types of banks are obviously differentiated, and the profit pressure of big banks is relatively greater, liquidity easing supports the interest rate difference and revenue of urban agricultural and commercial banks, and the asset quality index is also more stable.

Tianfeng Securities said that affected by the performance concerns, the banking sector basically fell back to the starting point of the market in early July, valuations are at an all-time low. The mid-year data of bancassurance supervision will make the market fully anticipate the reported performance of listed banks, which can be optimistic about bank stocks. The rise of risk-free interest rates can easily lead to a shift in stock market style. The economy is the core of valuation, under the steady economic recovery, supporting the reasonable repair of bank stocks, the fourth quarter valuation switch is also worthy of attention.

Bank of China Securities believes that from the main regulatory indicators in the second quarter, the expansion rate of industry scale continues to increase slightly, interest rate spreads narrow in one quarter, but the rate of decline slows down, and banks consolidate the foundation of asset quality to strengthen their ability to resist risks. however, it is expected that the stricter identification standards will affect the net profit performance in the second quarter. Affected by the fluctuation of the medium-term performance, the short-term sector valuation is not flexible enough, but the plate has the characteristics of low valuation and high dividend yield, the medium-and long-term allocation performance-to-price ratio is prominent, and the inflow of overseas incremental funds helps to promote the revaluation. I am optimistic about the absolute earnings of the sector. As for individual stocks, as August is about to enter the performance period, it is recommended to focus on high-quality stocks with sound fundamentals (China Merchants Bank, Ningbo Bank, etc.), as well as low-valued stock banks with improved fundamentals (Everbright Bank, etc.).

GF Securities Co., LTD. said that the current valuation of the banking sector is at the bottom of history, and the position of public funds has dropped to a low level, which basically contains the market's expectation of negative growth in bank net profit this year compared with the same period last year. Individual stocks, it is recommended to pay attention to the profits are expected to maintain a good level of Jiangsu and Zhejiang city commercial banks.