How Many Banks Will Be Injured In The Process Of Deleveraging And Shadow Banking?

Guo Shuqing's "strong drugs" deleveraging, the future investors will get lower returns from banks.

These two days are discussed with some bank's private banking department, and the market judgement for future is more consistent.

With the liquidation of financial chaos by regulators, more and more redemptions have been made. The risk free rate of return will also decline in the future, and the internal risks of the banking system will continue to be exposed.

Recently, Minsheng Bank has launched a 3 billion yuan "false financial management" incident. Zhang Ying, President of the Hangtianqiao branch of Minsheng Bank Beijing branch, was suspected of counterfeiting products and attracted the high net worth customers of the private bank of the bank with the way of "letting profits" of the products, which resulted in over 150 investors being covered and the amount of money involved or up to 3 billion yuan.

This has led to the rapid expansion of the shadow banking scale, the idle flow of funds in the financial sector and the rapid expansion of asset bubbles.

After the Qingming Festival, the CBRC issued seven regulatory documents in more than ten days.

In April 25th, Guo Shuqing, chairman of the CBRC, made a direct statement. "If the banking industry is in a mess, I will quit my job as chairman of the CBRC.

This is leadership responsibility. "

It can be seen that regulators' determination of "strong drugs" to cure financial chaos is very determined.

The bottom line of Guo Shuqing's deleveraging is that there is no overall risk.

In April 25th, the Political Bureau of the CPC Central Committee analyzed and studied the current economic situation and economic work, and put forward three guarantees: ensuring stable and healthy development of the economy, ensuring the deepening of structural reforms on the supply side, and ensuring that there is no systemic financial risk.

China will leverage, but in the process of deleveraging, the development of economy, the reform of supply side, the collapse of individual bubbles, and the complete collapse will absolutely not be possible.

Taking Minsheng Bank as an example, how many banks will be injured in the process of deleveraging and cleaning up the shadow banking? According to UBS, by the end of 2016, the size of shadow banking credit in China was about 60-70 trillion, and the proportion of total credit has increased to 33% from 10% in 2006.

In the opinion of the industry, the real size of China's shadow banks may be higher.

With the promotion of financial chaos, the size of China's shadow banking will also decline. Interbank business, bills discounting and outsourcing business will be cleaned up, and Minsheng Bank will be more seriously affected.

Data show that Minsheng Bank has increased sharply in the past two years, and the discounted business in the same industry and bills has increased sharply. In 2015 and 2016, the interbank assets of Minsheng Bank increased by 34.41% and 85.76% respectively, while the discount discounted loans increased by 193.67% and 109.65% respectively.

Over the same period, the growth rate of ICBC interbank assets was -30.47% and 27.65% respectively, while the discount discounted loans increased by 49.04% and 37.92% respectively, much lower than that of Minsheng Bank's two businesses and relatively high asset quality.

Assuming that the size of China's shadow banking returns to the level of 2006, that is, the proportion of shadow banking credit scale to the total credit scale has dropped to 10%, then the scale of banking credit will be reduced by 23%, and the profits of Minsheng Bank and the entire banking industry will be seriously damaged.

What is the specific value? In 2016, the net income of Minsheng Bank was 94 billion 684 million yuan, and net profit was 48 billion 778 million yuan. If shadow banking returns to 2006 level, the total credit will drop by 23%. Finally, the net income of Minsheng Bank will lose 21 billion 700 million yuan, and net profit will be close to "waist cut".

If the risk clearance work is completed within three years, Minsheng Bank will lose about 7 billion annually.

From the perspective of assets, the CBRC clears up the shadow banking business, such as bills and non-standard businesses, and indeed has a very big impact on banking profits.

From the perspective of liabilities, the performance of banking industry will also be affected by a lot of negative effects.

With the advance of financial deleveraging and the tightening of monetary policy, the shortage of capital and the rising interest rate will become the norm. Facing the "debt shortage", the cost of banking will also increase. However, the macro investment environment is deteriorating, and the phenomenon of "asset shortage" has not yet improved. The yield of banking assets is difficult to raise, which will lead to tighter interest rates on banks and bank profits will be squeezed.

This trend has been reflected in the financial reports of listed banks.

Among the more than 20 listed companies, the net interest income in 2016 declined by nearly half of the total interest income. Only a few large banks with strong competitiveness at the liability side were not affected too much.

Minsheng Bank is a group of banks that are more affected. The proportion of net interest income to interest income declined from the first quarter to the fourth quarter, which was 48.74%, 48.38%, 47.44% and 46.43% respectively.

According to this trend, the net interest margin of Minsheng Bank will drop to around 44%-42% this year and next year, which will have a significant negative impact on profits.

What is the specific value? According to the financial data of Minsheng Bank in 2016, the impact of the liability side on the net profit of Minsheng Bank in the next two years is about 4 billion 100 million -90 billion yuan.

Besides Minsheng Bank, the achievements of Societe Generale, Everbright Bank, Nanjing bank, Ningbo bank and Shanghai bank will also be greatly affected.

Yes

Bad debts also have negative effects.

With the cooling of the real estate market and the expected cooling of the new economic cycle, the bad debts of the banking sector will go further.

At present, the official accounts of China's banking bad debt rate are around 2%, but most people think this data is underestimated. Radical institutions and economists even believe that China's bad debt rate is as high as 15%.

In 2016, the proportion of high-risk loans and low risk personal loans of Minsheng Bank to the loan balance was 56.67% and 43.33% respectively. If the ratio of risky debt to high-risk loans was 9% and the ratio of risky debt to low risk loans was 3%, the actual NPL rate of Minsheng Bank would reach 6.4%.

However, the official loan rate issued by Minsheng Bank is only 1.68%.

According to the largest data we estimate and the data gap calculated by Minsheng Bank, the profit margin of Minsheng Bank will be reduced by 4.72%.

In 2016, Minsheng Bank's net profit was 48 billion 778 million. If net interest rate dropped by 4.72%, Minsheng Bank will lose 2 billion 302 million of its profit.

To sum up, from the asset side, that is to clean up the shadow banking will make Minsheng Bank lose 21 billion 700 million yuan and lose about 7 billion every year. From the liability side, the interest rate will cause losses to the Minsheng Bank by 4 billion 100 million yuan, and the bad debt will make the Minsheng Bank lose 2 billion 302 million yuan.

Because of the problem of classification, there will be partial loss and repeated calculation, but this proportion is not too large, so the biggest loss of Minsheng Bank theory is 13 billion 420 million yuan, equivalent to 27.5% of last year's net profit.

As of April 25th, Minsheng Bank's share price was 7.84 yuan, down 20% from its 9.9 yuan high in 2016.

There are many factors that affect stock prices. From the point of view of profitability, Minsheng Bank's share price will probably have a drop of about 7%.

It is estimated that there are more than one financial institution like Minsheng Bank.

With the promotion of business and the demand for redemption of financial products caused by higher interest rates, there may be more risk events similar to Minsheng Bank's financial management cases.

If there are only a few risks, the regulators will be willing to chase the remaining ones. If the big banks are in trouble, or the debt crisis will be leveraged, the regulators will be cautious.

The livelihood of the banks that they invest in is a heavy investment for ordinary investors.

How do ordinary investors guard against such risks? Investors need to look closely at contracts and product descriptions, understand the flow of funds raised, and pay special attention to products with high yield.

Most importantly, whether it is a self financing bank or a financial product for sale, it must be confirmed whether it is formal or not, which is known in the "China financial network".

Don't buy it.

The future yield will also decline. A 4% yield is pretty good. Any financial institution has a risk-free return rate of 10% or even higher. It must be a liar.

Remember, the pie in the sky is lost in the swan's mouth. The pie that ordinary investors get is mostly poison coated with sugar.

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