June credit data: Weak demand and continued loan pricing pressure, preferred high-quality banks (J.P. Morgan)
J.P.
J.P. Morgan analyzed June credit data and pointed out that social financing and new loans fell short of expectations, retail loans contracted, and new corporate loan pricing declined. Deteriorating loan mix and weak demand will put pressure on banks' net interest margins and retail asset quality. This means that the overall operating environment of the banking industry remains under pressure and profit growth faces challenges. The market has expected pressure on the industry, but the data confirms the continuity of the trend. The institution has a negative overall view of the banking industry and highlights banks with strong profitability resilience, such as China Construction Bank, Bank of China, ICBC, CITIC Bank and China Merchants Bank. One-sentence conclusion: June credit data fully reflects weak demand and pricing pressure. The banking industry is under pressure as a whole, and investment needs to focus on leading banks that can survive the cycle and have stable asset quality. Positive/negative: Positive for the four major banks including China Construction Bank, Bank of China, and ICBC, as well as leading joint-stock banks such as China Merchants Bank and CITIC Bank; negative for joint-stock banks and city commercial banks with large retail exposure and sensitive asset quality. The current market has anticipated pressure on the industry, and stock prices have partially reflected the pessimism. Catalysts: 1) Net interest margin and non-performing loan ratio data disclosed in banks’ interim reports; 2) Whether policies have introduced measures to guide credit costs down, thereby easing pressure on banks.