Editor | Sun Ming
China Merchants Bank is on fire!
After passing through the magical 2020 and entering the more uncertain 2021, China Merchants Bank suddenly "rioted" in the capital market, and its stock price rose more than the whole of last year in just one month. And if you count it from last year's lowest point, the stock price has nearly doubled.
It should be pointed out that China Merchants Bank is not a small-cap stock. Its current market value has reached 1.38 trillion yuan, which is a typical dancing elephant.
What is the concept of 1.38 trillion? Such a market capitalization is second only to Industrial and Commercial Bank of China and China Construction Bank among banking stocks. According to the market capitalization calculation of the China Securities Regulatory Commission, China Merchants Bank has even surpassed China Construction Bank, and is only four daily limits behind ICBC.
But there is another side to high market capitalization. China Merchants Bank’s profits are only one-third of those of Industrial and Commercial Bank of China. And if ranked in terms of asset size in 2019, China Merchants Bank's total assets are 7.4 trillion yuan, while "Universe Bank" has exceeded 30 trillion yuan. The two are not in the same grade at all.
But it is such a target that is attracting the favor of institutions and ordinary investors. The latest institutional investment data shows that as many as 914 institutions hold positions in China Merchants Bank (tradable shares), of which 869 are funds alone. It is the sixth largest institutional holding in A-shares and the largest institutional holding in banks. Recently, heavyweight investment institutions have frequently investigated banks.
What does this mean? Who is speculating on China Merchants Bank? Why is there so much speculation about China Merchants Bank? What kind of changes are the ideas and logic of institutional stock selection undergoing? What is the bubble and quality of China Merchants Bank? Is the carnival of bank stocks already here?
It may take time to answer these questions, but no matter what, China Merchants Bank is an object worth "dissecting".
Entering 2021, China Merchants Bank made a sharp counterattack, rising by more than 25% in more than a month, while last year it only rose by 20.58% . This performance is unparalleled even in the face of several trillion-dollar state-owned banks - the activity of a trillion-dollar "big plate" joint-stock bank is actually as active as several city commercial banks that have skyrocketed.
Also since last year, A-shares have become popular and the stock prices of various "Maotai" stocks are relatively high. Seeing that there are more and more voices saying that the banks are bullish, this time I did not "get on the train" Silver Mao's investors were once again troubled by shortfalls.
Picture/Visual China
However, there was a "riot" in bank stocks, and investors who were waiting for brokerage stocks to drive the bull market were somewhat disappointed. . A retail investor with many years of experience in A-share investment told AI Financial News: "Everyone used to claim that securities companies were the standard bearers of the bull market. Last year's group market was so active, and the business of securities companies was also reflected in the financial reports. Unexpectedly, banks The stocks started to rise first."
The fundamental support brought by the macroeconomics, the tightening of funds has pushed up credit interest rates, the cooling of risk appetite in the secondary market, and Internet finance." The threat of "buying orders" has dropped sharply, and the financial report after the impact of the epidemic and capital transfer has exceeded expectations... The market's optimistic view on bank stocks can be summarized as "the right time, the right place and the right people". If the funds in the group are worried about the tightening of market capital, they may look for more stable investment targets. Bank stocks that are in the midst of a wave of net losses are considered by many investors to be the best choice.
Judging from the trend of banks, there was a surge in the market in July and November last year, but they soon fell back sharply. Although China Merchants Bank is also a target of institutional alliances, its performance is not good. At the top of institutional holdings, there are industry leaders such as Kweichow Moutai, Wuliangye, Ping An, Midea Group, CATL, China Merchants Bank, China Duty Free, Luxshare Precision, and Hengrui Pharmaceuticals. However, China Merchants Bank only rose by less than 21% last year. %, it is the worst-performing group stock among the top 10 institutional holdings except Ping An.
Why can China Merchants Bank become another "Chosen One" this time? Some people think it is the market differentiation, some people think it is the advantage of the high-growth retail track, and some people think it is the boost from financial reports.
In any case, from hitting a new low on March 19 last year to today, China Merchants Bank’s stock price has risen by more than 80%, while the bank index has risen by less than 17% during the same period. Compared with Xiamen Bank, Hangzhou Bank, Ningbo Bank and other city commercial banks, this performance is definitely not the craziest, but as a "large cap (market capitalization)" bank stock, doubling the market is rare.
As a result of the surge in China Merchants Bank’s share price, its total market value has continued to exceed that in the A-share market. On the last trading day before the Spring Festival in 2021, China Merchants Bank once rose by more than 2% in early trading, with its stock price hitting a new high of 56.40 yuan/share. It closed back to 54.55 yuan/share. Its current total market value of 1.38 trillion ranks third in the entire A-share market. The previous CCB and ICBC are already leading by less than 500 billion. Although China Merchants Bank's profitability is still far behind that of ICBC, Agricultural Bank of China, Bank of China, and China Construction Bank, it surpasses all other domestic listed banks, with expected profits in 2020 exceeding 97.3 billion yuan.
Last year, as the new scale of public funds exceeded a new high of 3 trillion, ordinary investors became more concerned about fund positions and position adjustments. In the latest quarterly report, in addition to China Merchants Bank, there are also 585, 414 and 329 funds with top fund holdings in banking stocks Industrial Bank, Ping An Bank and Bank of Ningbo respectively. Some institutional investors told AI Finance and Economics that institutions choose targets not only based on how much money they make now, but more importantly, their future potential and moat.
In the institutional grouping market, investors like to call the grouping leader in each industry "XX Moutai" to reflect the same irreplaceability as the "King of Stocks" Kweichow Moutai : High barriers, high profits, and high growth. In the banking circle, China Merchants Bank is the "Silver Mao".
Because of the successful transformation of its retail business, China Merchants Bank is billed as the "King of Retail". In recent years, regardless of performance or stock price, China Merchants Bank has achieved overtaking in corners, especially in the secondary market. Several large state-owned banks with a scale of trillions either have a very small circulation ratio. For example, China Construction Bank has a total market capitalization of 1.73 trillion. Less than 70 billion is in circulation; or most of the circulating shares are in the hands of state-owned assets, such as Industrial and Commercial Bank of China. Of the total market capitalization of China Merchants Bank of 1.38 trillion, 1.13 trillion is in circulation. Among the top ten A-share shareholders, except for China Merchants, which holds 13.04%, the rest are all below 10% or even 5%.
This also means that in addition to institutions continuing to increase their positions, ordinary investors also have more opportunities to participate, and more and more retail investors are impatient to join in. As of the end of the third quarter of last year, the number of shareholder accounts of China Merchants Bank had reached 417,800, an increase of more than 120,000 over the same period last year.
“A-shares are famous for their low valuations of bank stocks, but I didn’t expect the counterattack to happen after the epidemic,” said a stock investor In the investment exchange group, I asked my friends, "Has the impact of the epidemic passed so quickly?" However, some investors said in the group that they had sold liquor and bought banks without hesitation.
The market’s “good impression” of banks may stem from the sharp contrast between the late and early stages of the epidemic. Under the pressure of the epidemic's impact on the economy, financial concessions to entities, and real estate regulation, the valuation of the entire banking sector fell to a historical low last year. However, judging from financial report data, most banks have shown signs of improvement since the second half of last year. By December, an investor named Li Lu completely detonated the secondary market.
Picture/Visual China
Li Lu is known as the Chinese closest to Buffett and manages Buffett’s friend Charlie Mun He became famous for recommending BYD stock to Buffett. Just last December, Li Lu's Himalayan Capital suddenly took action on the Hong Kong shares of the Postal Savings Bank of China, and sold HK$4.3 billion for it. Later, it continued to increase its position to buy "Jiubai" (currently holding 5.49% of the shares).
Subsequently, Hong Kong stocks and A-share banking sectors continued to move.
As early as November, Li Lu also investigated Ping An Bank. Coincidentally, Li Lu also appeared in the recent institutional survey and reception records released by Wuxi Bank. Also participating in the survey were CITIC Construction Investment, Guosheng Financial, China Universal Fund, Huatai Baoxing Fund, and Yangtze River Pension. These are all domestic Well-known buyer and seller institutions, every move affects the hearts of "leeks".
Extending the time line, AI Finance found that in the past six months, Bank of Ningbo, Bank of Suzhou, and Bank of Shanghai have all had institutions "visited" them, and all of them were Jing Lin and Gao Yi. , Ruiyuan, Morgan Stanley, Invesco Great Wall, Bank of Communications Schroders, Hillhouse and other big-name institutions, among which Bank of Ningbo has been repeatedly investigated by many institutions. Breaking down the stock price performance in the past six months, these banks are at the forefront.
Li Lu’s establishment of the Postal Savings Bank may be just a trigger this time. Although the epidemic is raging, last year most banks continued the downward cycle of NPL ratios for nearly three years, and their asset quality was better than before the epidemic. This issue confused many people. However, the good news continues in front of us, and many retail investors are also buying and buying along with institutions.
Judging from the 18 listed banks that have released their 2020 annual reports and performance forecasts, after large-scale write-offs of non-performing loans, the industry has generally achieved a decline in the non-performing loan ratio. Profitability has also mostly achieved positive growth. Thinking about the "1.5 trillion capital transfer entity" requirement in the first half of the year, these performances have exceeded market expectations.
The domestic macro-economy continues to improve, which is also a good thing for banks. This is the main support for bank fundamentals. On the other hand, although the central bank stated that the monetary policy will not take a "sharp turn," expectations of tightening funds are gradually forming, and many people believe that this is bad for high-priced group stocks and good for bank stocks with stable performance at low valuations. As a result, many stock trading groups began to panic. Seeing that the liquor, new energy and other group stocks in their hands gradually fragmented and "collapsed", Zhen Moutai, which had already risen to more than 2,500 yuan per share, could not afford it. Some people did not want to miss it anymore. "Opportunity to make money", I bought 4 bank stocks in just one week.
"The financial-oriented funds I bought have reached 20 points without realizing it." Someone posted in the group that the yield rate of a certain bank ETF bought in August has already reached 20 points. Reaching 18.34%, although it is still far lower than the more than 40% increase of the Shanghai and Shenzhen 300 Index in the same period, it still increased its position in this fund in February. On February 5, the banking sector, which had been rising sharply for many days in a row, once again "exploded" and set off a rising limit wave. Wuxi Bank hit the daily limit. Some retail investors analyzed in the group: "The one in Wuxi is gambling in nature. I was trapped after chasing it yesterday." , who knew it would hit the daily limit today." On the same day, China Merchants Bank's stock price also hit a new high. A stockholder who claimed to have been trading in stocks for more than 20 years said: "I don't buy anything now, I just buy banks. I have already doubled my profit from the China Merchants Bank I bought last year."
Is the bank carnival coming?
The last "riot" in bank stocks was after the Ant Group IPO was called off. Ant's biggest profit comes from Alipay, a platform with more than 700 million monthly users, and a market share of 55% in third-party mobile payments. In addition, there are more than 1.2 trillion yuan of Yu’e Bao. Among the 2.1 trillion yuan of loans (as of the end of June last year), 1.73 trillion yuan are personal consumption loans (mainly issued through Huabei and Jiebei in cooperation with financial institutions), and 421.7 billion yuan. It is a small and micro loan. The former accounts for 21.5% of the balance of short-term personal consumer loans in China. The power of traffic can be imagined.
Although Ant continues to cooperate with traditional financial institutions, it holds eight licenses in banking, insurance, insurance brokerage, public offering, fund sales, private equity, factoring, and small loans. On the right hand side is huge traffic. The "trading generates finance" model creates risks and also touches other people's "cheese". After the Ant incident, the regulatory authorities issued a series of new regulations for Internet financial supervision. Some netizens commented: Banks have been suffering from "Ant" for a long time.
Picture/Visual China
But are today’s banks really as glamorous as reflected in the capital market?
“Nonsense!” A senior bank researcher disagreed with the statement that tightening funds would push up credit interest rates, thereby benefiting banks. “The current benefits for banks have already happened. It is the easing (lag effect) since the second half of last year. (On the contrary) the hidden worry is that the growth rate of M1 is slowing down and the macroeconomic growth rate is slowing down."
He believes that currently. Banks are similar to the market where M1 climbed at the end of 2018 and surged after the Spring Festival in 2019. If the currency falls rapidly, the upside potential of bank stocks may be limited.
The question that needs to be clarified most is, have banks really emerged from the haze of the epidemic?
Judging from the financial report data, the impact of the epidemic has been clearly reflected in most banks’ semi-annual reports since last year, and the growth rate of net profit has increased from positive to negative situation. At that time, it was reported that some banks had received verbal guidance from regulatory authorities, requiring them to appropriately adjust their net profit growth in the first half of the year. Some analysts say that this will have less impact on banks with low NPLs and high provisions and greater room for adjustment, but on the other hand, there may be significant fluctuations.
On February 2, Ping An Bank, as the first listed bank to disclose its annual report, handed over a dazzling report card. Executives made a high-profile announcement at the performance meeting An unprecedented 90.936 billion non-performing assets were written off, an increase of 42.5 billion yuan compared with 2019. Further analysis of the write-off of non-performing assets revealed that loans accounted for only 59.36 billion yuan, and the remaining more than 30 billion yuan were investment assets. Of the 69.611 billion yuan in credit impairment provisions, only 43.148 billion yuan was provided for loan impairment losses, and nearly 26.5 billion yuan was provided for investment assets. The provision coverage rate during the same period decreased by 16.89% month-on-month. This also means that when impairment provisions consume more, releasing provisions may provide Ping An with greater room for profit adjustment.
"Anyway (the epidemic) has had a great impact on the loan business. Last year we worked overtime to extend car loan repayments," said a banker in a prefecture-level county in Shandong Province Employees bluntly said that loans are difficult to make, "We mainly do large car loans. In the first half of last year, the cars could not run (business), so how can we repay if we don't have money." However, this impact has not been reflected yet.
The situations of banks of different natures vary greatly. When the demand for "1.5 trillion yuan in profits" first came out, there were rumors in the banking circle that several state-owned banks, in particular, would cut costs to lower costs, but the rumors were finally refuted. Wang Wei, who works at a local branch of the Agricultural Development Bank, feels exactly the opposite: "Because we are a policy bank, we mainly complete policy tasks. The benefits have not been reduced, but completing the tasks is beneficial." In the early days of the epidemic, Wang Wei's bank Responding to policies to support industries related to epidemic prevention and control, it provided a 10 million yuan loan at an annual interest rate of 2% to a textile company that produces non-woven fabrics (raw materials for masks). The cost is about 3.8 percentage points lower than the bank's general corporate loans. .
"We will make up for the impact through our own efforts, but there is no such thing as a salary cut, and employees' income will not have much impact." The vice president of a local branch of China Construction Bank also said AI Financial News said that even if they give away profits, they will choose high-quality customers and mainly support enterprises by providing preferential interest rates, so that banks can benefit. An employee of a local branch of the Agricultural Bank of China also said: "Loan growth last year was relatively large. Many people were afraid to invest when the epidemic hit, and they had surplus deposits. On the other hand, the demand for loans from enterprises short of money has also increased significantly. Banks will respond to the policy to reduce Provide them with cost-reduced loans. ”
There are two main channels for banks to make profits. One is the squeeze on net interest margins, and the other is the increase in bank non-performing loans. Guotai Junan Bank's team estimates that every 5bp of net interest margin narrowing is equivalent to a profit of 0.12 trillion yuan; through write-offs and write-offs, every 5bp increase in the non-performing ratio before write-off is equivalent to a profit of 0.06 trillion yuan.
According to Sun Guofeng, director of the Central Bank's Monetary Policy Department, in 2020, the China Banking and Insurance Regulatory Commission guided banks to give out profits of about 4,200 yuan by urging banks to reduce fees, support corporate restructuring and debt-for-equity swaps. billion yuan; guiding loan interest rates to fall and benefiting 590 billion yuan; re-lending and rediscounting to support the issuance of loans with preferential interest rates and benefiting 46 billion yuan; falling bond interest rates benefiting bond issuers worth 120 billion yuan; two direct instruments benefiting 380 billion yuan. Taken together, these figures are basically consistent with the original plan to give away 1.5 trillion yuan in profits.
"Domestic development is basically stable. Large and medium-sized enterprises are doing well. Some small and micro enterprises have been shuffled. According to the proportion of collateral and disposal methods, the business of each bank is not very good. The same, but the specific risks are also different." Regarding potential adverse risks caused by poor corporate management, a person in charge of China Guangfa Bank Beijing Branch told AI Finance News, "The risks are generally deferred for 2-3 years."
If lagging risks can be considered in the next 2-3 years, banks are still facing two problems: new regulations on asset management and new regulations on real estate.
This year is the last year that the new asset management regulations will expire after the extension. Although major banks are accelerating the construction of wealth management subsidiaries and increasing net value products (relative to wealth management products) ) ratio, but the pressure for rectification is still not small. As of the end of last year, the balance of non-guaranteed bank wealth management products in my country was 25.86 trillion yuan, of which net value products were approximately 17.40 trillion yuan. The latter accounted for 67.29% of the former, but it took banks three years to reach this proportion. .
The person in charge of the Beijing Branch of China Guangfa Bank stated that the new real estate regulations will have a relatively large impact on loan scale and operating income. This impact may be more direct than the epidemic. However, some analysts said that 2021 is likely to be a "small year for the stock market and a big year for the property market," which may not be a bad thing for banks. However, recently, Shanghai, Hangzhou, Guangzhou, Shenzhen and other cities with booming property markets have successively introduced regulatory policies, once again suppressing the loan market.
Valuation controversy
While China Merchants Bank’s share price soared rapidly, the market also had controversy over its valuation.
"China Merchants Bank and Ningbo (Bank) are special." The above-mentioned senior bank researcher bluntly said that such banks do not necessarily strictly follow liquidity rules.
From a fundamental analysis, China Merchants Bank, Ping An Bank and Bank of Ningbo are the retail banks that have taken the lead in improving their business asset quality and recovering their retail business relatively quickly. Industrial Bank belongs to the beneficiary economy. After the recovery of manufacturing banks, the stock price performance of these banks in the secondary market is indeed significantly better than that of most bank stocks.
It can be seen from "Moutai" in various industries that high-margin repetitive consumables are easier to grow. China Merchants Bank is the largest retail bank in China, and many CMB credit card holders are familiar with it. As of the end of June last year, China Merchants Bank had 151 million debit and credit card customers, with a total asset balance of 8.26 trillion yuan in retail customers under management. , including 65.2673 million credit card users, corresponding to 96.3873 million bank cards, making it the largest credit card issuing bank in China. Coupled with the rapid profit growth, this meets the criteria for institutions to select "Moutai" to a certain extent.
As of the end of June last year, China Merchants Bank’s retail financial business had achieved operating income of 78.779 billion yuan, accounting for 53.10%. This proportion has continued to decline, and the competitive pressure of the retail business has also increased. is getting bigger and bigger. Although the personal retail business of city commercial banks including Bank of Ningbo is also developing rapidly, it is not a big threat under the restrictions on off-site deposits. The biggest rival is Ping An Bank. Ping An Bank focuses on smart retail. As of the end of last year, the number of credit cards in circulation had reached 64.25 million, and the number of retail customers had reached 107 million. The gap is gradually narrowing.
Among China Merchants Bank’s retail customers, the monthly average fully discounted RMB total assets are 500,000 yuan and above, and the monthly and daily average fully discounted RMB total assets of private banks are 1,000 yuan. Retail customers worth RMB 10,000 and above are high-net-worth customers, and competition in the market is fierce. At the end of the first half of last year, there were 2.9179 million and 91,000 customers respectively, of which the asset size of private banking business was 2.16 trillion yuan. During the same period, Ping An Bank's private banking customers (average daily assets exceeding 6 million yuan in any month of the past three months) exceeded 50,000, with an average annual growth of 13,700 in the past two years. The scale of private banking assets has exceeded 1 trillion yuan, with an increase of The speed is significantly faster than that of China Merchants Bank.
Another pressure comes from regulation. "It is not appropriate to use consumer finance to expand consumption." On the evening of February 8, the central bank mentioned for the first time in the "Monetary Policy Implementation Report" for the fourth quarter of 2020 that it must be highly vigilant about the overdraft effects and potential risks of a rapid increase in residents' leverage ratio, and It said that some financial institutions have ignored the risks behind consumer finance, customer qualifications have dropped significantly, and the problems of long-term debt and excessive credit are prominent. Since 2020, the NPL ratios of some banks’ credit cards and consumer loans have shown signs of rising.
It can be seen in the Black Cat complaint that the reasons for user complaints include failure to accept negotiated repayments, violent collection by third parties, harassment of family members, and malicious intent. Derating and so on. AI Finance and Economics found through sorting out financial report data that from 2018 to the first half of 2020, the number of China Merchants Bank's credit cards in circulation increased by 34.98%, 13.04%, and 1.14% respectively compared with the end of the previous year, and the credit card transaction volume was 3,793.836 billion yuan and 4,348.615 billion yuan respectively. , 2035.657 billion yuan, with growth rates of 27.74%, 14.62%, and -0.12%; credit card non-performing loan rates were 1.11%, 1.35%, and 1.85% respectively. In the first half of last year, the balance of non-performing loans of China Merchants Bank increased by 3.053 billion yuan, mainly from non-performing credit cards.
From the perspective of income composition, more than 70% of China Merchants Bank’s income comes from interest income, with fees and commissions contributing about 20%. Among the interest income contributions, China Merchants Bank’s short-term The average yield on loans is significantly higher than the average yield on medium- and long-term loans, with credit card overdrafts and small and micro loans being the main drivers. In the first half of last year, the yield rates on corporate loans and retail loans of China Merchants Bank were 4.14% and 6.10% respectively. Although there is still a big gap in loan size, Ping An Bank's two yields last year were 4.28% and 7.23% respectively, both higher than China Merchants Bank. Comparing the net interest margin, which reflects profitability, although the industry generally declined due to the impact of the epidemic, China Merchants Bank's net interest margin and net interest margin in the first half of last year were 2.42% and 2.5% respectively. Not surprisingly, there may be a slight decline in the fourth quarter. As of the end of last year, Ping An Bank's net interest margin could still remain at 2.53%.
Returning to the financial aspect, although the valuation of the entire banking sector is not high, the differentiation is already very obvious. Bank of Ningbo, Ping An Bank, China Merchants Bank, and Bank of Hangzhou have all Valuations have reached high levels, with dynamic price-to-earnings ratios and price-to-book ratios exceeding the 2015 highs. As funds from the south are pouring into the Hong Kong stock market, China Merchants Bank's Hong Kong stock market continues to hit new highs. But just as the stock price continues to reach new highs recently, "smart money" Northbound Funds reduced its holdings of more than 10 million A-shares of China Merchants Bank.
Behind the turn of funds, cash out at high prices also began to occur frequently. The Social Security Fund recently cashed out more than HK$159 million by reducing its holdings of 59.867 million Bank of China H shares. Shanshan Shares, owned by one of the original shareholders of Bank of Ningbo and capital tycoon Zheng Yonggang, liquidated Bank of Ningbo. The third largest shareholder Youngor has also recently reduced its holdings. Hold and cash out more than 10 billion yuan.
As early as December 17 last year, Dajia Life Insurance sold more than 19.3 million A shares of China Merchants Bank, reducing the number of shares held to 1.232 billion shares. Since Anbang was reorganized into DaJia Insurance in July last year, DaJia Insurance has successively reduced its holdings in stocks such as China State Construction Engineering Corporation, Vanke A, Eurasia Group, and Dashang Holdings, but this is the first time it has reduced its holdings in China Merchants Bank.
(At the request of the interviewee, Wang Wei is a pseudonym in the article)