Phoenix New Media Hong Kong stocks | China Merchants Securities (Hong Kong) issued a research report that there is a certain risk of fluctuation in the asset quality of the banking industry: 1) there is some negative correlation between the income / profit growth of industrial enterprises and the non-performing loan generation rate of major banks. The recently announced moving average of revenue growth of industrial enterprises has gradually slowed down, which may mean that the average bad generation rate of the banking industry is under some pressure. 2) from the historical data, the adjusted loan demand index has a cycle similar to the average non-performing rate of the major banks to some extent. The significant decline in the index under the latest data may mean that the average bad generation rate of major banks is under some pressure. 3) when the growth rate of social finance stock declines, the average non-performing rate of major banks is more likely to rise, for example, during the period from 2017 to 2018. Although the growth rate of social finance stock has stabilized recently, it has shown a downward trend in the second quarter as a whole, which may mean that the asset quality of major banks is under some pressure as a whole.

The research newspaper continued to point out that at present, Bank of China Ltd. 's forecast price-to-book ratio for 2021 is about 0.42 times. In terms of different valuations: 1) the forward price-to-book ratio of large banks is at the low end of the historical range; 2) in terms of dividend yields, the dividend yields of some leading banks (such as Bank of Communications) are about 15% higher than their 2016 highs. The spread over 10-year government bond yields is about 24% higher than the 2016 high. These indicators show that large banks are undervalued.

The bank selectively recommended Postal Savings Bank of China (01658HK), which has a high proportion of retail business, good asset quality and high provision coverage: the company's non-performing loan generation rate was as low as 0.13% in the first quarter, the overall non-performing loan ratio was 0.86% (end-2020: 0.88%), and the non-performing loan coverage ratio rose to 416.98% from 408.06% at the end of 2020. The company's overdue period of more than 60 days has been included in non-performing loans, and deferred principal and interest loans account for only about 0.2% of the total loans, and the management is confident in maintaining the stability of the overall asset quality. Maintain the buy rating and maintain the target price of HK $6.75, equivalent to about 0.89 times forecast 2021 price-to-book ratio, or its historical average price-to-book ratio premium of 21%.

Based on the possible pressure on the asset quality of the banking industry, the bank lowered the target price of Industrial and Commercial Bank of China by 17% to HK $5.30, equivalent to 0.55 times the 2021 forecast price-to-book ratio, or a 25% discount to the average price-to-book ratio of the past five years, maintaining its "buy" rating. Cut the target price of Bank of Communications (03328HK) by 12% to HK $5.25, equivalent to 0.41 times the 2021 forecast price-to-book ratio, or 25% off the average price-to-book ratio of the past five years, maintaining the "buy" rating; cut the target price of Agricultural Bank Of China (01288HK) by 15% to HK $2.80, equivalent to 0.40 times the 2021 forecast price-to-book ratio, or 37% off the average price-to-book ratio of the past five years, maintaining the "neutral" rating.

The main catalysts of the industry: the asset quality increases, the net interest margin increases; the main risks of the industry: the asset quality decreases, the net interest margin decreases.