How to select bank stocks?

How to select bank stocks? The key to investing in small banks

I heard a joke long ago.

Mr. Chen Dongsheng, Chairman of Taikang Life Insurance, once said at the mobilization meeting, "Compared with Ping An and China Life Insurance, Taikang Life Insurance has received very few customer complaints." A salesman quietly said to the people around him:' Of course! If I get my driver's license and never drive, I'll never get a ticket. "

This story tells us that there are big troubles and small benefits. The same is true of the banking industry. Because it is small, there are not many problems. But does this mean that small banks are generally better? No, it just means that small banks are not qualified to face this problem.

In the article "How Chinese chives Choose a Bank Stock", I mentioned the profit model of the banking industry. Profit = scale * spread+income-credit cost-operating expenses. In the short and medium term, the problems faced by the banking industry are: high credit cost of enterprises, the impact of new asset management regulations on revenue, the pressure of the debt side to affect the spread under the market interest rate, the deterioration of the traditional business environment and the constraint of capital adequacy ratio to affect the growth of asset scale. Every index is stressful, so transforming it into an industry knowledge means cost input. Therefore, this round of adjustment of medium-sized stock banks is the hardest hit, and the profit and operating data are generally ugly. On the contrary, small banks have unique scenery.

What is the reason behind it? What are the future prospects of small banks? What is the logic of our investment in small banks? Look at this leek. Remember, well said, don't be stingy with the reward. Call me an idiot if you don't speak well. Although I have more time, I promise I won't fight back.

Why do small banks have unique scenery? Let's take a look at the example of small banks and the profit structure of Bank of Ningbo 20 17.

In 20 17, Bank of Ningbo's net interest income accounted for 65%, handling fee accounted for 23.3%, and investment income accounted for 13.2%, which basically offset the changes in fair value and exchange losses. The net interest income in 20 16 accounts for 72%, and the fee income accounts for 23.5%. Changes in fair value and foreign exchange losses are basically offset. 20 17 The decrease in the proportion of net interest income is mainly due to the increase in interest expenses and the substantial increase in investment income. What is the so-called investment income? As can be seen from Figure 2, it turned out to be an investment money fund. This is actually a kind of interest income.

As for commission income, agency business accounts for 60%. What is agency business? In 20 16 and 20 17, the following reports are found under Reports.

After two years of strong growth, in 20 18 years, the commission fee was obviously impacted. See the figure below. Compared with the same period of last year, it decreased by nearly 10%. I don't know whether the fee income has been affected by the supervision and cleaning up of off-balance sheet financial management. The guard who knows the situation may wish to say a few words.

After checking Baidu, the explanation of' agency business' is as follows:

Having said that, I mainly tell you that in Bank of Ningbo's profit structure, the net interest income accounts for the vast majority, and the income from investing in money funds accounts for nearly 75%. In the fee income, agency business accounts for the vast majority, 60%.

At this time, some readers may say: Is it normal except that the commission income is lower than the stock price? Ok, please look at another picture.

The above picture shows Bank of Ningbo absorbing deposits from the society, borrowing funds from peers, issuing interbank certificates of deposit, and putting most of the funds into' securities investment'. Loans only account for 37% of total assets.

In this round of economic turmoil, traditional public assets have suffered the most. In Bank of Ningbo, the proportion of loans is extremely light, and the proportion of corporate loans is relatively light. As can be seen from the figure below, it has been stable at around 62% in the past two years. Therefore, corporate loans account for less than 23% of total assets. In medium-sized joint-stock banks, such as Shanghai Pudong Development Bank, corporate loans accounted for 3 1.6%(20 17 data).

In the geographical distribution of various loans in Bank of Ningbo, we can see that the proportion of Ningbo reached 465,438+0%, and that of Zhejiang reached 54%. The proportion of the Yangtze River reached 87%. The regional characteristics are extremely obvious. Among the loans of Shanghai Pudong Development Bank, the Yangtze River accounts for only 27%.

Here, do you want to understand why the risk control in Bank of Ningbo is good?

I tell you: 1. Compared with investment securities, the risk of loans is higher. Therefore, resources give priority to the development of' securities investment (live small enterprises)'. 2. Among the high-risk loan assets, the low-risk ones are only' high-quality regular customers' in the same region. Knowing the root of the problem, the probability of being struck by lightning will be higher.

But does this mean that Bank of Ningbo is an excellent bank? Is the future worth investing in?

Excellent, I think it must be excellent, but only compared with small banks. Its reality is completely different from that of medium-sized joint-stock banks. As for whether it is worth investing, I won't make a conclusion, but just say my opinion for your reference.

1. In terms of certainty, all business indicators of Bank of Ningbo are healthy. There is room for further expansion of asset scale, and the impact of accepting the new asset management regulations is not expected to be great. Judging from the provision reserve, the increase in credit cost has little effect on profits in the short term. Even there is room for further decline. The rapid growth of operating expenses in the first quarter shows that the company is actively preparing for future business development. In the battle for deposits in the new year, under the old caliber, deposits in the first quarter increased by 12% compared with the end of 20 17. Strong deposits even lead to an increase in interest expenses, affecting net interest income. These are all good factors.

2. What are the disadvantages?

Obviously. Because the income structure is too simple, it relies heavily on interest income. If the interest rate marketization is further deepened, the increase of deposit cost is likely to bring great pressure to the company's operation. This is also a problem that all small banks, including Bank of Ningbo, must face. Once the debt cost rises, in order to pursue the spread space, small banks will instinctively enhance their risk appetite. And the increase of risk appetite, the consequence is often a chicken feather.

Besides, for Bank of Ningbo, the number of high-quality customers who are familiar with the region is always limited. If we want to pursue scale growth, the consequence is that we must take the road of extension development. Compared with medium-sized banks and large banks, small banks are always at a disadvantage in debt. There is a simple reason. Perhaps Ningbo people are willing to deposit their money in Bank of Ningbo, and Bank of Ningbo can also provide better differentiated services to businessmen in the Yangtze River Delta, so they can absorb corporate deposits. Even the local government will provide strong policy support.

But out of Ningbo, out of the Yangtze River Delta?

Bank of Ningbo can also apply to develop business in Beijing, with the aim of providing additional services to customers in the Yangtze River Delta at most. Want to do business in Beijing? I'm afraid it's difficult. No Beijinger wants to deposit his money in a bank in Ningbo under the same conditions. If enterprises in Beijing have no business relationship with those in the Yangtze River Delta, why bother Bank of Ningbo? The Beijing government doesn't care about Bank of Ningbo. Bank of Ningbo's understanding of Beijing customers is certainly far less than that of local customers in Ningbo or customers in the Yangtze River Delta. So how to provide differentiated services? This road is impassable. If you want to leave, you must change your name first.

That is to say. There are natural restrictions on the development of small banks. You can also do well by sticking to your own ability circle and digging deep (region). However, once out of the ability circle, it is bound to face the dilemma of rising operating costs and credit costs at the same time. Regionality is the natural boundary that restricts the further development of small banks. This red line cannot be crossed. Otherwise, you will suffer the consequences.

These are two points that Chinese chives must pay attention to when investing in small banks. To sum up:

First of all, the impact of interest rate liberalization on small banks in the future is likely to be devastating. Therefore, we must pay attention to the situation on the debt side and then pay attention. Small banks with bad debts go straight there.

Second, small banks must focus on core users and adhere to the ability circle. Small banks that fantasize about expansion can go directly (such small banks should not exist, right? )。

Third, pay attention to the long-term development of regional economy and the growth and decline of core customers. The signs are wrong, the prospects are not good, pass the customs.

For other small banks, such as Bank of Nanjing, Bank of Guiyang, Bank of Beijing, Bank of Shanghai, Bank of Changshu, Bank of Wuxi and Bank of Zhangjiagang, you can make your own analysis with reference to this leek analysis template of Bank of Ningbo. It's not that hard. Snowball time forest