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Source | Xiaobei Caisi
Following the announcement of Bank of Shanghai’s 2020 performance report, on January 14,China Merchants Bank, Industrial Bank has successively handed over “exceeding expectations” report cards.
Three banks’ performance trends turn for the better
On the whole, the performance of the three listed banks exceeded expectations in the fourth quarter, reversing the decline in profitability in the first nine months in one fell swoop, making the full-year net profit of 2020 positive.
On January 8, Bank of Shanghai was the first to announce the 2020 performance report. Data show that the bank achieved operating income of 50.746 billion yuan, an increase of 1.90% year-on-year; net profit attributable to the parent was 20.885 billion yuan, an increase of 2.89% year-on-year.
On the evening of the 14th, China Merchants Bank and Industrial Bank both released performance reports. The report shows that in 2020, China Merchants Bank achieved revenue of 290.508 billion yuan, an increase of 7.71% year-on-year; net profit attributable to the parent company was 97.342 billion yuan, an increase of 4.82% year-on-year. Industrial Bank achieved revenue of 203.137 billion yuan, a year-on-year increase of 12.04%; net profit was 66.626 billion yuan, a year-on-year increase of 1.15%.
Looking at the fourth quarter alone, the performance of Bank of Shanghai, China Merchants Bank and Industrial Bank has been significantly restored, and net profit attributable to the parent has increased by 48.11%, 32.70% and 34.61% respectively. In terms of operating income, the three banks all increased by more than 10% year-on-year.
While operating performance improved, the asset quality of China Merchants Bank and Industrial Bank also improved. As of the end of 2020, the non-performing loan ratios of China Merchants Bank and Industrial Bank were 1.07% and 1.25%, respectively, down 0.09 percentage points and 0.29 percentage points from the end of 2019, setting new lows in the past five years.
In addition, both banks have increased their provision coverage ratios and thickened their “safety cushion.” As of the end of 2020, the provision coverage ratios of China Merchants Bank and Industrial Bank were 437.68% and 218.83%, respectively, an increase of 10.9 percentage points and 19.7 percentage points from the end of 2019.
Four banks’ share prices hit new highs
Three performance reports exceeding expectations have completely ignited investor enthusiasm. As of the close, 37 A-share listed banks were collectively red, and the China Securities Bank Index rose by 2.77%.
At the same time, it was bought by “Buffett successor” Li LuPostal Savings BankThe news of H shares stimulated, Postal Savings Bank of China once rose more than 17% in Hong Kong, and A shares rushed to the daily limit. As of the close, the bank’s total market value reached 473.163 billion yuan, rising to the sixth place in the bank’s market value.
Also outstanding was China Merchants Bank. After jumping to the fifth place in the total market value of A-shares, China Merchants Bank’s share price reached a new high and once rose to 53.89 yuan per share. As of the close, China Merchants Bank closed at 51.14 yuan per share, with a total market value of 1.29 trillion yuan, and the gap with China Construction Bank, which ranks second in the banking sector by market value, has narrowed again.
In addition, the share prices of Industrial Bank, Ping An Bank, and Bank of Ningbo also hit new highs today. As of the close, the total market value of the three banks reached 471.782 billion yuan, 407.524 billion yuan, and 230.648 billion yuan, ranking seventh, eighth and twelfth.
It is worth mentioning that investors’ love for Ningbo Bank, China Merchants Bank, Ping An Bank and Industrial Bank is not a whim. For the whole year of 2020, the share prices of the three banks have risen by 27.54%, 20.58%, 19.59%, and 10.23% respectively, ranking among the forefront of listed banks.
Bank valuations are expected to rise
After the banking sector rose sharply, as of now, there are still 27 banks with a P/B ratio below 1, and a net-breaking ratio of 72.97%, which is still at a low valuation.
As a depression in the value of A shares, will the valuation of bank shares be restored? Based on the supporting logic of economic recovery, a number of brokerage research teams supported bank stocks.
China Merchants SecuritiesLiao Zhiming’s team believes that as the economy improves, the pressure on banks to pay dividends decreases. It is expected that the growth rate of most A-share listed banks in 2020 will be significantly improved compared with the previous three quarters. In 2021, the bank’s internal and external conditions are suitable, and performance improvement is superimposed on low valuations, and bank valuations are expected to rise.
Bank of China Securities also holds the same opinion. Its research team pointed out that looking forward to 2021, it is optimistic about the performance of the banking sector. First, economic data shows that the steady recovery of the real economy has not changed, which is beneficial to the improvement of bank asset quality; second, monetary policy accompanying economic recovery Convergence of the margin will help ease the pressure on interest rate differentials; third, the bank’s previous adjustments, the current sector valuation corresponds to 0.81xPB in 2021, which is characterized by low valuations and low positions. As the domestic economic situation gradually improves, The willingness of the subsequent allocation of the sector is expected to increase.
The Minsheng Securities research report shows that the peaking of social financing, the tightening of credit, the strengthening of bargaining power on the asset side of banks, and the lifting of policy restrictions on profit release have all promoted the accelerated improvement of bank fundamentals, and the valuation of bank stocks still has room to rise.
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