Source: Stock Market Cheetah
Original title: Bank research--Key indicators for evaluating banks (Part 1)
Banks are more easily accessible to people in daily life, but many investors do not know much about the data in bank daily operations, especially in the capital market, many investors do not know if they evaluate banks. There are many indicators that affect the quality of bank assets. The author has previously made a detailed analysis of the bank's operating strategies, non-performing rate, provision rate, deposit-to-deposit ratio, capital adequacy ratio, interest income and non-interest income, and will not elaborate on it here.
This series mainly evaluates the key indicators of banks. There are two major aspects: interest rate spread and non-performing. interest rate spread is currently the main source of income for banks. In 2018, the net interest rate spread accounted for 77.9% of the operating income. Bad-performing assets are the focus of current bank impairment losses. Therefore, interest spreads and bad debts are key indicators for evaluating banks when conducting research on bank companies. This article starts with interest rate spreads. The following article will analyze the bad situation of banks. Combined with the previous and next articles, I believe that investors will also have a more comprehensive understanding of banks.
The bank's net profit we usually see is from operating income - operating expenses and business tax - asset impairment loss - income tax. Operating income mainly relies on interest income and non-interest income. Currently, the basic interest income of domestic commercial banks accounts for more than 80%. Asset impairment loss is a combination of the five-level classification of loan balance, non-performing ratio and provision coverage ratio for bank assets, among which non-performing assets (non-performing assets and non-performing ratio) can be calculated as the write-off and transfer of this year. Therefore, rate spreads and bad debts are the top priority in evaluating bank indicators.
Commercial banks are business models that operate risks, that is, to attract deposits and lend money. The deposits brought back are the bank's interest-bearing liabilities, and the loans released are the bank's interest-raising assets. Interest spreads are currently the main source of income for commercial banks. net interest spreads is to use interest income to minus interest expenses. Therefore, it is necessary for a business to analyze the influencing factors of bank interest income and interest expenditure to obtain changes in their interest spread.
First of all, the interest income of commercial banks generally comes from the return on interest-bearing assets, and the interest expense is generally the cost of interest-bearing liabilities. Among the income from interest-bearing assets, the yield of retail loan is the highest, which is 2% higher than that of corporate loans (normal corporate loans is 4.0%). Therefore, it is crucial to study the proportion of retail loans in commercial banks to total loans. Among the interest-bearing liabilities, the current deposit cost is the lowest, with a normal capital cost of only 0.5-0.6%, and the regular period is generally around 2-3%. Therefore, the proportion of current loans in the interest-bearing liabilities is the key to studying interest-bearing costs (of course, there will be an impact on interbank business, and we will discuss it later).
In the study of the proportion of retail loans, retail loan returns need to be taken into account. Some commercial banks have very high retail loan returns and the proportion of retail loans is high. At this time, we need to focus on non-performing asset ratio , because commercial banks should prevent them from giving loan conditions to some personal loans with lower credit ratings. At the beginning, they should look at retail loan returns more, but once the assets default later, it will affect their own asset quality. Therefore, commercial banks with more aggressive risk preferences may allocate high risks to obtain high returns. There will be examples of comprehensive comparisons with commercial banks later in the article, so let’s buy a close look.
In the study of the proportion of current deposits, this is an intuitive manifestation of the comprehensive competitiveness of a commercial bank.The cost of bank demand deposits is the rate of return of customer assets. Why do customers are willing to deposit funds in this bank with such low returns, so why don’t they transfer to high returns? Of course, this bank has good comprehensive services, and its customers' financial management, insurance, mortgage, credit card and other banking businesses are bound to this bank. This is the advantage. This is why retail banks cannot achieve it overnight and require long-term accumulation. It is also one of the biggest advantages of China Merchants Bank . Therefore, if a commercial bank has the highest proportion of current loans, it can be intuitively judged that the bank's core competitiveness advantage is. In addition, with the rapid development of Internet finance, commercial commercial banks have much more pressure to attract deposits than before, and there was even a deposit shortage before (commercial banks have deposit-loan ratio requirements). As for some commercial banks that will increase reserves at high interest rates later, this will increase the pressure on capital costs.
Below is the net interest margin of Construction Bank , China Merchants Bank , Ping An Bank , Pudong Development Bank , Pudong Development Bank , interest-generating assets income, interest-bearing liabilities cost, retail loan income, retail loan income, current deposit proportion, current deposit cost, non-performing loan ratio , asset adequacy ratio and other data will be used to provide you with practical practical experience of how to use the relationship between data and conduct a comprehensive analysis of the interest rate spread of banks. (Note: The data comes from the annual report of listed companies)
Analysis process:
1. From the perspective of net interest margin, among the four banks, China Merchants Bank has the highest net interest margin for two consecutive years, with a net interest margin of 0.22% higher than the second. The visual advantage is outstanding. Combined with 2
2, from the perspective of interest-bearing assets and interest-bearing liabilities, Ping An Bank 's profit is up to 5.11%, Pudong Development Bank 's 's 4.64%. However, it is necessary to consider the interest-bearing liabilities cost, Ping An Bank 's interest-bearing liabilities cost is up to 2.85%, while the general interest-bearing liabilities cost needs to be combined with the proportion of current deposits, Ping An Bank 's current deposits account for the lowest proportion of current deposits. Therefore, Ping An Bank seems to have the highest interest-bearing assets, but the cost pressure is obvious ( Pudong Development Bank is also similar). From the figure, it can be seen that the interest-bearing assets of China Merchants Bank are relatively stable, and the interest-bearing liabilities cost of China Construction Bank is better. Combined with 3
3 and after passing 2, look at the proportion of bank demand deposits, the proportion of current deposits of China Merchants Bank and China Construction Bank is the highest, which also verifies the second point again. Combined with the above, China Merchants Bank and China Construction Bank have a comprehensive advantage and a stable business model (i.e., low risk). Combined with 4
4 and the non-performing loan ratio, the lowest non-performing loan ratio is China Merchants Bank, and the highest is Pudong Development Bank . Combined with 2, Pudong Development Bank and Ping An Bank are used to allocate higher risk assets or have higher returns (high non-performing asset ratio).
5. Asset adequacy ratio, the higher the data, the better. The most direct thing is that risk resistance will be significantly improved, and the company will provide strong guarantees for subsequent business development. In the figure, CCB is currently the highest, and Ping An Bank is the lowest.
There is another set of data. China Merchants Bank's current deposit share in 2018 increased by 2.5% compared with 2017, but the cost decreased from 0.62% to 0.59%. In contrast, the proportion of current deposits in the other three companies in 2018 has declined. Ping An Bank and Pudong Development Bank fell by 5%, and China Construction Bank fell by about 1%, but the cost of current deposits in the two companies has increased significantly ( Ping An Bank costs have not changed). This is the core competitive advantage of China Merchants Bank, the king of retail.
That’s all for this article. Let’s make a simple summary. Interest spreads are the main source of commercial banks’ operating income and profits, low cost of current deposits is the focus, retail business is the key, and non-performing asset ratio is the risk. Through the lengthy analysis above, you should know which bank it is, but the author hopes that you can learn to study and analyze other banks by yourself. The following will conduct in-depth analysis of the bad situation of banks. At that time, you should have a full understanding of the banking industry.
