China-Singapore Jingwei, July 1st. Recently, Gao Ruidong, managing director and chief macroeconomist of Everbright Securities , and others issued a research report saying that the key to reducing the financing costs of the real economy is to reduce the liability costs of financial institutions such as commercial banks. Or thin the profit margins of financial institutions. By lowering the provision coverage ratio to release the profits of financial institutions and guide the cost of deposit liabilities to fall further, it can create about 22BP of downside space for the LPR quotation rate.
Specifically, the research report mentioned that compared with previous rounds of credit cycles, this credit cycle has shown some new changes: First, new credit has not stabilized simultaneously with new social financing, and social financing has increased year-on-year. After the growth rate began to stabilize and rebound in November 2021, the year-on-year credit growth rate continued to decline. Second, in the early stages of this credit cycle, the role of credit in driving economic growth did not rebound as quickly as in 2009, 2012 and 2015. Instead, it fluctuated repeatedly at the bottom like in 2019. Third, this credit cycle shows very significant short-term characteristics from the perspective of credit duration. The
research report pointed out that overall, since 2000, the return on investment of the real economy sector has experienced a process of first rising and then declining. Before the global financial crisis in 2008, the return on investment showed a continuous upward trend, reaching a high point of 12.08% in 2007. Then it continued to decline, falling to 6.37% at the end of 2021, and further falling to 1.63% in the first quarter of 2022 due to the impact of the epidemic. From the structure of
, the median of the return on investment of all A-share non-financial listed companies has generally shown a continuous downward trend since 2009, although there were periods of decline in 2012 and 2017. The platform fluctuated, but then entered a downward trajectory again. In addition, the proportion of listed companies with a return on investment lower than the loan interest rate shows an obvious cyclical trend. Since 2017, this indicator has been on an upward trend, indicating that there are more and more micro entities, and the return on investment has begun to change. It is difficult to support loan interest rates.
On the profit side, the research report stated that the key to reducing the financing costs of the real economy is to reduce the liability costs of financial institutions such as commercial banks, or to thin the profit margins of financial institutions. According to calculations, there is currently limited room for further compression of the profit side of commercial banks, but there is still room for further reductions in the provision coverage ratio. Under neutral expectations, lowering the provision coverage ratio can create a downside space of about 17BP for LPR.
On the cost side, reducing the liability costs of financial institutions such as commercial banks is another key to reducing the financing costs of the real economy. Under the constraints of internal and external balancing pressures, it is less likely to reduce policy interest rates in the short term; at the same time, the interbank liability costs of commercial banks are already at a low level, and there is a high probability that they will remain within a narrow range in the short term; but commercial banks’ There is still room for further decline in the cost of deposit liabilities, which can create about 5BP of downward space for LPR. (China-Singapore Jingwei APP)
