BANKING_SECTOR_UPDATE：HOT_TOPICS_IN_THE_BANKING_INDUSTRY-2013-01-16.ppt

banking sector update,hot topics in the banking,industry,citic securities research,15 january 2013,table of contents,future trends for listed banks,2013e outlook: monetary policy, deposit/loan, liquidity,analysis of banking sector operation in 2013e,unexpected variables: black swans?,2,1.1 what will drive the sector rally? improving,expectations & liquidity, correcting previous expectations: the banking sectors operational data have been in line with pessimistic market forecasts, which we see,as a warning against excessive pessimism regarding short-term industry fundamentals., stable nim: (i) on-balance-sheet loans continue to lean towards short-term borrowings; (ii) interbank operations are brisk asset quality under control: (i) quality problems are structure-related, not systemic; (ii) banks have room to write-off more bad,loans; (iii) the economy is stabilizing, easing capital supervision and regulation: (i) loan extensions; (ii) innovative financial tools; (iii) room for future policy rollouts, policy vacuum, macro stabilization and liquidity increase will drive up share valuations, policy vacuum: expect a policy vacuum (monetary, regulatory as well as industry policies) until the npc and cppcc meet in,spring 2013, stabilizing macro growth: (i) recovering investment; (ii) increasing economic activity, upbeat liquidity: (i) relaxed regulation on non-credit financing; (ii) central banks interference in foreign exchange rates, boosting,rmb valuation to attract liquidity from overseas,market performance: the banking stock index accumulated a 24% growth in dec 12, outperforming the broader market, sector index change: the “citic primary industry index banking” rose 24% during dec 12, in contrast to the 18% gain of the,csi 300, stock performance: cmb, pdb and industrial bank led the sector, adding over 30% each, turnover: the average daily turnover of banking stocks stood at rmb9.5bn in dec 12, far above the rmb3.95bn recorded in the,previous month, institutional position: based on citic institutional holding model, position in banking increased continuously during oct-dec 12;,the correlation between institutional allocation in banking stocks and the net value of funds increased substantially to 0.78 in dec 12 (from 0.14 in sep 12),3,05-01,05-07,06-01,06-07,07-01,07-07,08-01,08-07,09-01,09-07,10-01,10-07,11-01,11-07,12-01,12-07,csi,银行,1.2 what do the previous rallies tell us? timing of allocation: periods when the banking sector outperformed the market for two consecutive months: aug 06 jan 07: accumulating 39% above the broader market; in the midst of a bull run; abundant liquidity; expectations of inflation may 07 aug 07: accumulating 18% above the broader market; frequent rate hikes; rising interest rates which boosted the earnings of listed banks dec 08 jan 09: accumulating 10% above the broader market; offsetting low price by high volume; improving expectations in favor of earnings may 09 jun 09: accumulating 19% above the broader market; a-share valuation driven up by overseas rallies; abundant liquidity; upbeat earnings forecasts monthly changes in csi 300 & citic banking index since 2005,40%,沪深300,banking sector,20% 0% -20% -40% source: wind, citic securities research summary: common key catalysts of sector rallies real economy: recovering corporate operations which improve the outlook for asset quality monetary policy: strong quantitative indicators favoring liquidity forecast; rising interest rates in favor of banks nims funding: the liquidity condition is generally upbeat when the sector is on the rise sector operation: improving expectations or upbeat earnings prospects, with performances of key indicators varying at different stages 4,operational,early part of recovery:,cycle,shrinking volume ,relatively good,policy austere,austere,policy,relaxed,policy,1.3 investment clock: ticking to “desert time” in 2013e we create a “banking investment clock” to illustrate investment clock: 2013e is “desert time” for investing in banking stocks,the general rule for investing in banking shares against,desert time,relatively good time to enter,different economic and policy backdrops framework of the clock: the benchmark volume and,late part of a bull period:,shrinking volume ,price is determined by monetary policy aimed at reducing macroeconomic volatility. changes in macro,time to enter,high growth of earnings; limited asset risk,strong earnings; steady asset quality,stay-away time,and monetary policies are catalysts to banking stocks desert time: early part of recovery , late part of a bullish period,early part of a bullish period: relaxed volume declining asset risk,late part of contraction: cycle policy stable volume austere increasing asset risk policy,stay-away time:,late part of stagnation, late,tightening policy,part of recession relatively good time to enter:,early part of,late part of recovery: relaxed volume ,economic cycle,easing policylate part of recession: relaxed volume ,recession, late part of recovery, beginning of a bullish period, early part of stagnation,declining asset risk,relaxed policy,relaxed policy,increasing asset risk,2013e outlook: stabilizing macro, steady monetary policy with stable quantity and pricing, steady banking operation, easing asset quality risk due to economic recovery. investment in the,relatively good time to enter,early part of recovery: relaxed volume declining asset risk desert time,late part of recession: increasing volume increasing asset risk stay-away time,relatively good time to enter,banking sector enters the “desert time”. source: wind, citic securities research 5,sustainable,2013-15e cagr,1.4 can banking stocks rise further? the theoretical median of sustainable valuation is 1.3x pb estimating static pb valuation range of banking shares method: build a 3-stage dividend discount model (ddm) for the banking sector to obtain a valuation range in line with sustainable roe key assumptions: sustainable roe of 15%; average dividend of 33% forecast: assuming earnings growth of 10-15% in the next three years, the valuation of the banking sector should be in the range of 1.27x and 1.32x pb sustainable roe-based pb valuation table 可持续roe水平,1.27,10%,12%,15%,17%,20%,未来3年复合增长率,0% 5% 10% 12% 15%,0.77 0.81 0.85 0.86 0.88,0.93 0.97 1.01 1.03 1.06,1.16 1.21 1.27 1.29 1.32,1.31 1.38 1.44 1.46 1.50,1.54 1.62 1.69 1.72 1.77,source: wind, citic securities research the probability of sector reaching fair valuation analysis of preconditions: operations: on stabilizing macro growth, the chance of banking operations being substantially better or worse than forecast is slim. valuation of banking shares will tend to move into the fair zone. policy : (i) the peripheral impact of interest rate liberalization on the stock market depends on the pace and strength of policy implementation, but most of the continuing impact on banking operation will be factored in share price valuation; (ii) regulatory policy for risk control is likely to focus on standardization rather than restriction. this would help reduce operational risks. liquidity : liquidity becomes a key determinant of upward potential for share valuation. market liquidity may turn optimistic supported by monetary policy and the opening of the capital market . 6,2007h,2009,2010,2011h,2011n,2012h,历史平均,2007,2008h,2008,25,20,15,10,5,per (ttm),pb (latest data),批发零售,建筑业,银行业,0,estate,%,银行,保险,证券,0,7,1.5 suggestion increase positions continuously and pick stocks with promising earnings prospects,a summary of current investment in banking stocks:,valuation comparisons, institutional holding: rising for three consecutive months, estimated increase in holdings: from 4% to 8% sector edge: relatively visible earnings outlook and,市盈率（ttm）,市净率（最新财报）,attractive valuations,wholesale & retail,real房地产业,construction engineering,banking, recommendation: weigh in on banking stocks,correlation between market performances,change in banking position,of different sectors and the net value of funds,banking,insurance,securities,sector index,end-dec 12,end-nov 12,end-oct 12,end-sep 12,banking real estate construction materials,0.784 0.814 0.855,0.676 0.854 0.85,0.545 0.815 0.845,0.143 0.747 0.788,16 12 8.7 8 4,11.7,9.2,6.0,11.7,5.5 6.7 6.5 4.3,7.8,trade & retail non-banking financials,0.891 0.814,0.888 0.818,0.877 0.731,0.805 0.662,stock selection by type aggressive picks: banks highly capable of business transformation/product innovation, with above-average earnings growth and upside potential in share prices (cmbc, industrial, etc.) stable picks: dual advantage in earnings and valuation, steady profitability and attractive share prices (pdb, bobj, etc.) source: wind, citic securities research,table of contents,future trend of listed banks,2013e outlook: monetary policy, deposit/loan, liquidity,analysis of banking sector operation in 2013e,unexpected variables: black swans?,8,2.1 2013e policy outlook: monetary policy featuring steady quantity and price; relaxed and effective regulation monetary policy: steady quantity and stable price goal: appropriately expand the scale of total social financing and reduce real financing costs principle: steady credit issuance, relatively relaxed non-credit financing, stable liquidity in the interbank market,tools:,rrr for maintaining liquidity equilibrium within the banking system, as gauged by forex funds and budgetary deposits;,interest rate for maintaining balance between growth and inflation, as gauged by economic data and companies operational data; continued employment of open-market tools such as large-scale repos, as gauged by interbank rates regulatory policy: relaxed and effective goal: reducing banks operational risks and standardize business operation principle: relaxed but effective control, allowing adjustment by market force tools: assessment via indicators (capital and liquidity indicators, etc.) supervision over operation (agency, reserves for shadow banking, capital use, scale control, etc.) issuance of industry regulations (investment management for wealth management products, etc.) industry policy: still room for more policy rollouts; timetable and strength of new policies unknown; potential for policies to affect the market significantly marketization of interest rates: no clear timetable; pace and strength are vital; may curb banking operation mixed operation: banks initiatives to adapt to changes; reliance on advantages in client resource; banks remain in the upper part of the food chain 9,工行 ccb,abc,boc 交行 cmb 民生 兴业 pdb 光大 华夏 平安 北京,南京 宁波,2012年末预期ci*,systemically important,banks i-loan growth (pboc,2013 年 新 增 贷 款 能 力,元）,2.2 2013e credit forecast:,new lending to range,rmb8.5trn-9trn loan forecast: formula: estimate lending capacity using the differentiated rrr formula established by the pboc assumptions for 2013e: gdp growth: +7.9% yoy; cpi: +2.5% yoy; economic thermodynamics : 0.85 our forecast: (i) loan issuance by listed banks: rmb4.5trn; (ii) total amount of new loans: rmb8.5trn-9trn (the pboc may adjust coefficients to restrict or stimulate actual loan issuance) estimated credit and loans to be issued by listed banks,icbc 建行,农行,中行 bocomm招行 cmbc industrial 浦发everbright huaxia pingan bobj,bonj bonb,r=ai*(ci*ci） ai,0% 1,0% 1,0% 1,0% 1,0% 1,0% 1,0% 1,0% 1,0% 1,0% 1,0% 1,0% 1,0% 1,0% 1,0% 1,estimated ci at end-2012 系统重要性附加资本 secondary capital 逆周期资本缓冲 counter-cycle capital buffer,13.1% 13.4% 11.6% 12.7% 14.0% 10.6% 10.4% 10.1% 11.1% 10.2% 10.2% 10.3% 12.2% 12.3% 13.7% 2.50% 2.40% 2.40% 2.40% 2.00% 1.24% 0.93% 0.95% 1.04% 0.78% 0.53% 0.50% 0.50% 0.50% 0.50% 2.61% 2.97% 1.17% 2.26% 4.01% 1.32% 1.43% 1.17% 2.03% 1.43% 1.70% 1.80% 3.70% 3.80% 5.20%,bi,1.06,1.02,1.02,1.02,0.85,0.53,0.40,0.40,0.44,0.33,0.23,0.21,0.21,0.21,0.21,目标 gdp+cpi goal gdp+cpi,10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4%,银行 i贷款增速（央行测定）12.9% 13.3% 11.5% 12.6% 15.1% 12.9% 14.0% 13.3% 15.0% 14.7% 17.9% 18.9% 27.8% 28.3% 34.9% estimates),loan growth capability in （ 亿 11398 9927 2013e (rmb 100mn),7401,8958,4451,2432,1936,1558,2328,1506,1286,1366,1352,354,509,source: wind, citic securities research,10,m2,deposit,存款余额,total loan,unit: trn,m2增量,2013e,增速12%,growth:,growth:,growth:,11,2.3 deposit/loan and money growth forecast for 2013e,theory: liability growth in terms of loan issuance,deposit and loan growth in 2013e, deposit x (1-rrr) = (forex + loan + bond budgetary deposit) x (1-rrr) = loan + bond; in the event the pboc uses reserves to fully hedge against forex inflow, the above equation is,单位：万亿元 2010n 2011n 2012e,m2 72.6 85.2 97.4,m2 increase 10.2 12.2,存款增长 increase 9.1 11,outstanding deposit 71.8 80.9 93,假设信贷总量 assumption 7.5 8.3,almost identical. but in reality, the constructed,broad money (deposit) growth is not balanced by credit and loan growth. deposit forecast:,growth: 12% 增速13%13% 增速14%14%,109.1 110.1 111.0,11.7 12.7 13.6,10.9 11.9 12.9,103.9 104.9 105.9,8.5 8.5 8.5,assumptions: (i) loan increase: rmb8.5trn-9trn; (ii),增速15%15%,112.0,14.6,13.9,106.9,8.5,bond increase: rmb2.5trn-3trn; (iii) forex increase: rmb500bn-1trn,forecast:,bank,deposits,will,increase,by,rmb11.5trn-13trn in 2013e, with m2 growth reaching 13-14% source: wind, citic securities research,2.4 total social financing and liquidity in 2013e,total social financing forecast:,total social financing volume forecast and structure,structural analysis: total lending of rmb8.5trn-9trn; strong bond issuance; brisk growth in ba and entrusted loans;,others trusted loans,equity financing agency loans,corporate bonds foreign currency loans,bas rmb loans,slowing growth of trust loans,(rmb 100mn),forecasts:,(i) social financing will reach rmb15trn-,16trn, with growth slowing down; and (ii) the proportion of banks non-lending assets will rise, with continued trend of assets flowing out of balance sheet stable and promising liquidity liquidity in the real economy expected to remain stable: high social financing sustainable; upbeat funding supply and demand relatively low pressure on banks in terms of liquidity,management:,(i) healthy growth of liability on/off balance,sheet; (ii) limited need to reduce reserves; (iii) deft employment of repo tools; and (iv) relatively low interbank rates,source: wind, citic securities research,12,table of contents,future trend of listed banks,2013e outlook: monetary policy, deposit/loan, liquidity,analysis of banking sector operation in 2013e,unexpected variables: black swans?,13,small/mediumbanks,中小银行,thebankingindustry,全行业,thebankingindustry,全行业,small/mediumbanks,中小银行,thetop5banks,五大行,thetop5banks,五大行,total assets of banks (rmb trn),total outstanding deposits (rmb trn),140,120,100,80,60,20,0,短期,mid/long-,term loans,bills,40%,20%,0%,3.1 asset-liability: expansion,optimization in the midst of, given the traditional economic growth model and the early stage of financial reforms in china, bank assets will continue to be the,total bank assets will increase further,major source of social financing. the sectors asset/liability will grow further.,160,银行业金融机构总资产（万亿）,人民币贷款余额（万亿）, the increasingly diversified financial market and financial products will curb the growth of banking assets and liabilities. we forecast that asset growth in financial institutions will slow to 13% yoy in 2013e (vs. a growth rate of 13.3% yoy in 1-3q12). 40 optimizing asset-liability structure in the midst of expansion, asset: more on balance sheet loans become short-term loans while interbank assets become more structured,2004,2005,2006,2007,2008,2009,2010,2011 2012q3 2013e,the limited amount of on balance sheet loans will lean towards cash flow loans to smes,on balance sheet lending will lean towards short-term sme loans,the majority of interbank assets will be operated off balance sheet (in bancassurance, bank-equity, bank-bank, etc.) or as base assets for,120%,short-term loans,中长期,票据,structured products,100%,liability: increasing volatility in deposits and enhanced importance of the capital market ,80% 60%,35%,38%,18%,32%,34%,15%,linking deposits to financial products, widening the disparity between assessment-time deposit volume and daily deposit volume; growing pressure on liquidity management and increasing reliance on interbank funds,source: wind, citic securities research,12q1,12q2,14,of the impact of re-pricing on interest,to the rate-falling cycle in,mortgage,生息资产,estimated,2009年基准 2013年基准,interest margin,“other loans”,对息差影响 款/生息资产,pricing on,re-priced in,impact of re-,影响,on a 56bp rate,interest,1h13e/interest-,interest spread,pricing,margin,cut in 2013e,in 2013e,unit: bp,decline inimpact of re- other loans to be impact of the combined interest,margin on a,rate cut,icbc,ccb,abc,boc,交行,华夏,cmb,民生,pdb,光大,ping an,bobj,bonj,宁波,3.2 interest margin: the impact of re-pricing will taper- off in 2013e,expect average interest,impact of re-pricing on interest margin,margin to change 5-10bps in,calculation重定价因素对息差影响测算 margin,relative 类比2009年降息周期,1q13e, touch the bottom in 2- 3q13e and be flat or increase slightly yoy in 4q13e,单位: bp,按揭贷款/ loans/interest- generating assets,estimated 按揭重定价 在2013h1重 其他贷款重 重定价因素 利率下调 利率下调 定价的其他贷 定价对息差on 合计影响 216bp导致 56bp导致息 息差降幅 56bp 差降幅 generating assets,the above forecast is based on three assumptions: macro economy remains steady; investment continues to be a key,工行 建行 农行 中行,7.2% 10.6% 7.5% 10.4%,3.6 5.3 3.7 5.2,8.4% 8.2% 3.5% 3.6%,4.7 4.6 1.9 2.0,8.3 9.9 5.7 7.2,58 72 70 52,15 19 18 13,growth driver; no systemic risk in,bocomm,7.3%,3.6,53,14,corporate operation or the financial system no adjustment in benchmark deposit and loan rates; the overall monetary en