The Zhitong Finance App learned that Orient Securities released a research report saying that looking ahead to the fundamentals of listed banks in the second quarter, and guided by a smooth investment pace, Q2 credit investment is expected to increase year-on-year. The pressure on interest spreads is expected to weaken marginally, and it is expected that interest rates on newly issued loans will stabilize in Q2-Q3. Asset quality is stable overall, but poor forward-looking indicators are rising marginally, so we need to pay attention to the limited room for credit costs to decline. Operating pressure is expected to slow down in the second quarter, and the revenue structure may improve. 1) The pressure to narrow interest spreads has weakened, and combined credit investment may increase year-on-year. The growth rate of net interest income in the second quarter is expected to rise marginally. 2) Net fee revenue is expected to continue to be under pressure. 3) The driving effect of net other non-interest income on revenue may decline marginally.
Looking ahead to 24 years, the fundamentals of bank operations are expected to bottom out. Focus on the strength of banking sector risk settlement after confirmation, the inflection point of interest rates on new loans, and the bottoming of bank interest spreads after debt costs for all sectors of society fall. The current monetary and credit environment is friendly, and finance is also expected to move forward to stabilize economic expectations, and continue to be optimistic about bank stock performance.
The main views of Orient Securities are as follows:
Performance continues to be under pressure, and other interest-free commercial banks lead the growth rate. As of 24Q1, the year-on-year growth rates of listed banks' revenue, profit before provision, and net profit to mother declined by 0.9 pct, 0.1 pct, and 2.0 pct, respectively, from the end of 23.
Looking at the breakdown, the growth rates of net interest income and net handling fee revenue declined by 0.2 pct and 2.3 pct, respectively. Revenue support still mainly comes from net other non-interest income. By sector, the overall performance growth rate of the state-owned sector declined compared to the end of 23, the margins of stock banks improved, and the urban agricultural commercial bank led the way in revenue and profit growth before provision, and there was a marked improvement compared to the end of 23.
Table expansion is slowing down, and credit investment in urban commercial banks is booming. As of 24Q1, the year-on-year growth rate of interest-bearing assets of listed banks fell 1.9 pct from the end of 23, and the year-on-year growth rates of total loans, investment assets, and interbank assets declined by 1.0 pct, 1.2 pct, and 4.0 pct, respectively. The year-on-year growth rate of interest-bearing debt decreased by 1.7 pct compared to the end of 23. Among them, the growth rate of deposits decreased by 2.5 pct, while the growth rate of payable bonds and interbank debt increased by 10.4 pct and 1.8 pct, respectively. State-owned banks are investing heavily in smooth credit, and interbank debt is expanding at an accelerated pace; the momentum for stock bank expansion is weak, and the growth rate of deposit and loan growth is the lowest in all sub-sectors; urban commercial banks are relatively active. Among them, the loan growth rate increased 0.3 pct compared to the end of '23, showing good resilience. Agricultural and commercial banks have increased their efforts to allocate interbank assets, while the growth rate of interbank debt has declined.
The quarterly decline in net interest spreads narrowed year over year, and debt costs may have improved. Orient Securities estimates that the 24Q1 net interest spread of listed banks was 1.47%, down 14 bps from '23, but the decline was 3 bps narrower than 23q1. The estimated return on interest-bearing assets and the interest-bearing debt cost ratio decreased by 18 bps and 4 bps, respectively, compared to 23. The improvement in debt costs is expected to ease the downward pressure on 24-year interest spreads to a certain extent.
The defect rate has been declining steadily, and the attention rate has risen slightly. As of 24Q1, the non-performing ratio of listed banks decreased by 1 bp to 1.25% compared to the end of 23, and overall asset quality was stable. The interest rate rose by 3 bp to 1.61% from the end of '23. There was a large differentiation among individual stocks, and the nine listed banks increased by more than 10 bps. Looking at key areas, the bad rate for public real estate was still high in '23, but the peak of bad generation may have been passed; exposure to personal business loan risks has increased, and the pressure on agricultural and commercial banks is relatively greatest. It is estimated that the 24q1 credit cost ratio increased by 8 bp to 0.86% at the end of 23, and the provision coverage rate increased slightly by 0.2 pct to 243.7%, maintaining good risk offsetting capacity.
The capital adequacy ratio continues to improve, and the cash dividend ratio has increased. As of 24Q1, the capital adequacy ratio of listed banks at all levels improved by 20-40 bps compared to the end of 23, or was affected by a combination of the slowdown in risk-weighted asset growth and the implementation of new capital regulations.
The cash dividend ratio of listed banks increased by 0.8 pct to 29.28% year on year in '23. The high dividend advantage was consolidated. Some banks plan to arrange mid-term dividends, and dividend stability is expected to be further enhanced.
Three main lines are recommended at this stage:
1. State-owned banks with high dividends, it is recommended to focus on Bank of Communications (601328.SH) and Agricultural Bank (601288.SH); 2. High-quality regional commercial banks with both procyclical and high dividend characteristics, focusing on Bank of Jiangsu (600919.SH) and Bank of Nanjing (), and Bank of Suzhou (002966.SZ); 3. Procyclical and valuation-adjusted varieties, focusing on Bank of Ningbo (002142.SZ). 601009.SH 601838.SH 600926.SH It is recommended to pay attention to China Merchants Bank (600036.SH).
Risk warning
Monetary policy tightened beyond expectations; fiscal policy fell short of expectations; risks spread in key areas such as real estate.