A number of bank stock prices have recently reached new highs, indicating that the industry is optimistic about the stability of bank interest margins, which is conducive to banks’ replenishment of capital. However, bank stock prices are highly differentiated, with more than two-thirds of bank shares still “broken”.
February 5, Postal Savings Bank, China Merchants Bank, Industrial Bank, Ping An, Ningbo, Bank of Hangzhou 6 bank stocks hit a record high, driving the bank ETF is also a new high. But at the same time, most bank stocks are still net, and even some bank stocks are still at historic lows.
For bank stocks, industry insiders believe that, or with the recent credit line control, loan demand is strong, rising interest rates. However, the supervision will not sit idly by the loan rates to show signs of rising, mortgage concentration assessment will also limit interest spreads.
Six bank stock prices set a new high, Postal Savings, Societe Generale end broken net
On February 5 morning, A number of A-share bank share prices continued to record high. Postal Savings Bank (601658), China Merchants Bank, Industrial Bank, Ping An Bank (000001), Bank of Ningbo, Bank of Hangzhou shares at the highest 6.28 yuan, 55.94 yuan, 25.70 yuan, 25.31 yuan, 42.95 yuan, 17.17 yuan.
Bank share price stack record high, drive bank ETF also record high. The bank ETF traded at 1.277 yuan in early trading on Feb. 5, up 5.36% since February and 11.44% so far this year.
Among the banks with higher gains, China Merchants Bank’s total market value reached 1.36 trillion yuan, ranking second among A-share listed banks, exceeding China Construction Bank’s total market value of 1.26 trillion yuan, second only to Industrial and Commercial Bank of China (601398.SH) 1.74 trillion yuan. The stock price of Industrial Bank ended to “break the net” status, and the price-to-book ratio (PB) recovered to 1 times. The total market value of Industrial Bank of China (531.8 billion yuan) also exceeded PSBC, ranking the fifth after the total market value of the four major banks and China Merchants Bank. Bank of Ningbo’s PB is 2.56 times higher, and the total market value of the bank is 257.4 billion yuan, more than China CITIC Bank and only second to Postal Savings Bank.
The new shares listed on the day of the Bank of Chongqing opened at 44.04% by the daily limit, the daily limit was once opened at 15.60 yuan, a price-to-book ratio of 1.40 times. The stock is currently trading at 15.60 yuan, at 1.40 times book value. However, Bank of Chongqing’s H shares as of press time HK $5.17, which makes Bank of Chongqing A/H premium as high as 2.61 times.
But in fact, while some bank stocks are at new highs, most bank stocks are still net, and even some bank stocks are still at historic lows.
Among the four major banks, since February to the close of the 4th, Industrial and Commercial Bank of China, Construction Bank shares slightly down 0.39%, 1.92%, Agricultural Bank of China shares closed flat, Bank of China shares up 0.32%. Over the same period, in the joint-stock banks, CITIC Bank, Minsheng Bank, Everbright Bank shares also appeared slightly lower. In addition, Jiangsu listed six rural commercial banks, five of the decline of more than 2 percent.
Of the 38 A-share listed banks, only 11 have PB greater than 1 times. The price-to-book ratio of Huaxia Bank, Bank of Communications and Minsheng Bank “halved”, with PB less than 0.5 times. The PB of Chongqing Rural Commercial Bank, Bank of Beijing, Bank of China and China Citic Bank is between 0.5-0.6 times. Shanghai Pudong Development Bank, Agricultural Bank of China, Bank of Jiangsu and Everbright Bank are between 0.6-0.7 times.
The rebound in lending rates is compounded by banks’ replenishment of capital
In addition to valuation factors, in the short term, many industry and analysts believe that it may be related to recent credit line controls, booming loan demand and rising interest rates.
Guoxin securities financial industry chief analyst Wang Jian believes that in the short term, the central bank’s desired loan line control is relatively nervous, and the loan demand is strong, the loan interest rate is not so fast up in the short term, the long-term is expected to rise, positive for the bank net interest margin.
“China Merchants Bank is a relatively bullish stock in the industry, but today’s PSS share price performance is more surprising.” A fund manager in South China said that banks’ share prices were better affected by the economic recovery, plus part of the lending rate up.
According to the Monetary Policy Implementation Report for the third quarter of 2020, in September 2020, the weighted average interest rate on loans was 5.12%, down 50BP year on year and up 6BP quarter-on-quarter seasonally.
On February 5, a survey by the 21st Century Business Herald found that a number of banking industry insiders said that credit supply in January was little changed or slightly controlled compared with last year. Under the signal of monetary policy shift, the credit supply in January changed little or was slightly controlled compared with last year. Large banks in some regions have controlled the scale in January, but different standards are held in different places.
Among them, in terms of the types of credit supply, the mortgage limit is mostly limited, personal consumption and credit card transactions are relatively weak, but the demand for small and micro loans and corporate businesses is strong. Among them, credit card loans and other personal loans by the epidemic, in the local New Year and other factors did not appear before the usual explosive growth before the Spring Festival.
In the view of the banking industry, due to the sharp increase in credit supply, the establishment of financial management subsidiaries and non-standard financial management statements, the elimination of non-performing assets and other factors, commercial banks are facing the pressure of replenishing capital, and they also need better stock price performance to create a window period for replenishing capital.
“Low bank valuations certainly affect replenishment of capital. If PB is at 0.6 times, there is basically no way to replenish Tier 1 capital, and even convertible bonds are hard to issue.” ‘The share price issue involves banks replenishing capital, and regulators are aware of it,’ said a banking analyst at a North China brokerage. East China bankers admitted that small and medium-sized banks added capital pressure comparison, the stock price rebound is conducive to through the fixed increase, rights offering and other refinancing means of supplementing capital.
From the market, this year, Ruifeng rural commercial bank will be, the Bank of Chongqing today A-share listing, raised 3.763 billion yuan, the Bank of Ningbo after last year’s 8 billion yuan fixed increase in January to plan rights offering financing 12 billion yuan. In addition, on February 3, the Bank of Communications announced that it planned to issue no more than 140 billion Tier 2 capital bonds to supplement Tier 2 capital. Postal Savings Bank plans to issue Tier 2 bonds of up to 150 billion yuan in the next two years, while Industrial Bank plans to issue Tier 2 bonds of up to 100 billion yuan.
For the bank’s share price to record high, the industry also expressed concern. The fund manager said regulators would not sit idly by while bank lending rates showed signs of rising. In particular, after the central bank issued the new regulations on mortgage concentration assessment in January, banks will be constrained in the issuance of housing loans, which will also limit bank interest margins.