The real estate sector welcomes the policy warming again. The People's Bank of China recently issued three consecutive documents on the real estate market, announcing that it would lower the interest rate of housing provident fund loans, cancel the lower limit of the national individual housing loan interest rate policy, and reduce the minimum down payment ratio of national individual housing loans.
Will the housing related indicators that suppressed the valuation of bank shares in the past become a booster of stock prices? Industry insiders predict that after the launch of the "portfolio fist" in the real estate market, bank related risks will be mitigated, asset quality will be improved, and bank valuation will usher in a repair period.
Housing related loan indicators carry forward
In bank loans, real estate loans have always played an important role. Pan Gongsheng, President of the People's Bank of China, said at the 2023 Financial Street Forum annual meeting that real estate related loans accounted for 23% of the bank loan balance, of which about 80% were personal housing loans.
From the perspective of corporate loans alone, China Securities Journal reporters combed the annual reports of several listed banks and found that by the end of 2023, the balance of public real estate loans from Bank of China, Industrial and Commercial Bank of China, China Construction Bank and Agricultural Bank of China had exceeded 800 billion yuan; The balance of public real estate loans from Shanghai Rural Commercial Bank, Qingdao Rural Commercial Bank, Guiyang Bank and Zhejiang Commercial Bank accounted for more than 10% of the total loans, respectively 14.71%, 13.02%, 11.45% and 10.40%. It is worth mentioning that more than half of the listed banks' loans to public real estate account for more than 5% of the total loans.
However, before the recent series of real estate support policies were introduced, the housing related indicators of banks were generally under pressure on a stable basis. According to the data disclosed by the Central Bank, the China Securities Journal reporter found that the year-on-year growth rate of the balance of real estate development loans declined from 5.9% at the end of the first quarter of 2023 to 1.7% at the end of the first quarter of 2024; The year-on-year growth rate of individual housing loan balance continued to decline from 8.9% at the end of the first quarter of 2022 to - 1.9% at the end of the first quarter of this year.
At the same time, the reporter found that among the 31 banks that disclosed the non-performing loan rate of real estate, about half of the non-performing loan rate of public real estate at the end of 2023 had increased compared with the end of last year, and the non-performing loan rate of public real estate reached 9.27%. Among them, the non-performing loan ratio of Bank of Hangzhou, Bank of Zhengzhou and other five banks to the public real estate industry increased by more than 2 percentage points, and Bank of Hangzhou saw the largest increase, reaching 2.91 percentage points.
Change the pressure bearing situation
On May 17, the People's Bank of China issued three notices on real estate, including lowering the loan interest rate of personal housing provident fund by 0.25 percentage points, lowering the minimum down payment ratio of personal housing loans, canceling the lower limit of the commercial personal housing loan interest rate policy for the first and second housing, and simultaneously setting up 300 billion yuan of affordable housing loans, Increase the de stocking of commercial housing stocks and the supply of affordable housing.
At the beginning of January this year, the Notice on Establishing a Coordination Mechanism for Urban Real Estate Financing was released, proposing a "white list" of real estate projects that can be given financing support, which will be pushed to commercial banks in the administrative region to support the financing and construction delivery of real estate projects under construction. 297 cities at prefecture level and above have established real estate financing coordination mechanisms. As of May 16, the commercial bank has approved the loan amount of 935 billion yuan for the "white list" project according to the internal approval process.
The government has introduced "16 financial policies", optimized operational property loan policies, launched a loan support plan for guaranteed delivery of buildings, rescued real estate enterprises for refinancing, lowered the down payment ratio of individual housing loans and the lower limit of interest rate policy, and lowered the interest rate of the first housing loan in stock... In recent years, in order to promote the stable operation of the real estate market, the government has taken comprehensive measures from both the supply and demand sides, A series of measures have been taken to stabilize the real estate market.
With the introduction of a series of real estate support policies, the indicators of bank real estate loans are expected to change the previous pressure situation.
"From the residential side, the demand for housing is expected to pick up, which will further promote the growth of mortgage loans. The purchase of commercial housing for sale by local governments as affordable housing will also help to destock the stock of commercial housing, help stabilize housing prices, to some extent, improve residents' expectations and stimulate demand for housing. From the enterprise side, affordable housing refinancing will help to promote the operation of the "white list" mechanism, enhance the availability of financing for real estate enterprises, and the real estate development loan is expected to further warm up. " Wang Yifeng, chief analyst of Everbright Securities financial industry.
Tao Ling, Vice President of the People's Bank of China, said that 300 billion yuan of affordable housing refinancing would encourage and guide financial institutions to support local state-owned enterprises to purchase completed but unsold commercial houses at reasonable prices in accordance with the principles of marketization and rule of law. The People's Bank of China will issue re loans at 60% of the loan principal, which can drive bank loans of 500 billion yuan.
"By the end of March, the extension period of existing real estate development loans had increased by 147% year on year." Xiao Yuanqi, deputy director of the State Financial Supervision and Administration Administration, introduced at the State Council's regular policy briefing held on May 17 that in the first quarter of this year, commercial banks had issued 963.6 billion yuan of new real estate development loans and 1.3 trillion yuan of new personal mortgage loans.
Bank stock valuation is expected to be repaired
As of May 20, the price to book ratio (overall method) of the bank (Shenwan) was only 0.50 times, and the overall valuation level was low. Among the 42 A-share listed banks, the P/B ratio of more than 60% is less than 0.6 times.
"At present, the bank's valuation is low. The important reason is that the risk in real estate, urban investment and other fields has led to the pressure on the quality of bank assets. The implementation of the real estate 'package' is expected to improve the operating conditions of real estate enterprises and the pressure on cash flow. The risk of banks in the real estate field is expected to be mitigated, and the valuation is expected to be repaired." Liu Yuchen, an analyst with Guolian Securities, said.
The "combination fist" in the real estate market is expected to help stabilize the quality of bank assets. Xiao Feifei, chief analyst of CITIC Securities banking industry, believes that from the perspective of current real estate finance logic, the impact of the new policy on banks is that quality is more important than pricing. Although the interest rate of newly issued mortgage loans may further decline in the next stage, which is expected to have a certain negative impact on the return on assets, the debt cost control since this year, including the "manual interest compensation" standard and the pressure drop of high interest products, is expected to bring stronger marginal support for the net interest margin.
In Xiao Feifei's opinion, the quality change of real estate related loans in the next stage is more important. By the end of 2023, the average non-performing ratio of real estate corporate loans of listed national banks is 3.98%.
"The liquidity injection brought by the purchase, storage and re lending has played a positive role in mitigating the risk of the real estate market, while the marginal stabilization of house prices will bring about the improvement of residents' wealth effect, both of which are conducive to the improvement of bank asset quality," said Dai Zhifeng, director of Zhongtai Securities Research Institute.
