The Top Three Banks Earn 866 Million Yuan Per Day: Currently, seven listed banks have released their annual reports for 2009. The three major state-owned banks - Industrial and Commercial Bank of China (ICBC), Bank of China (BOC), and Construction Bank of China (CBC) - together achieved operating revenues of 808.84 billion yuan, an increase of 0.41% year-on-year; they realized a net profit of 316.17 billion yuan, an increase of 18.46% year-on-year. If calculated based on 365 days in a year, the top three banks earn a net profit of 866 million yuan per day. ICBC became the most profitable listed company on both markets by earning a net profit of 352 million yuan per day. CCB and BOC achieved daily net profits of 292 million yuan and 221 million yuan, respectively.
In 2009, the asset scale of listed banks expanded rapidly, effectively alleviating the impact of narrowing interest rate spreads, basically achieving "volume compensating for price." In addition, due to significant year-on-year decreases in asset impairment for many banks and adjustments to provisions at year-end, performance slightly exceeded market expectations.
Statistics show that the seven banks together achieved operating revenues of 876.94 billion yuan, an increase of 0.7% year-on-year; they realized a net profit of 339.7 billion yuan, an increase of 19.91% year-on-year. Except for Ningbo Bank, the net profit growth rate of the remaining six listed banks remained above 15%. Ping An Bank became the company with the largest net profit growth, realizing a net profit of 5.031 billion yuan, an increase of 719.29% year-on-year. The low base in 2008 and the growth in net interest income significantly boosted the company's performance.
In 2009, the scale of the seven banks expanded somewhat, absorbing deposits totaling 26.51 trillion yuan, an increase of 24.28% year-on-year, slightly lower than the industry's deposit growth rate of 28.21%. The loan scale was 16.62 trillion yuan, an increase of 33.24% year-on-year, higher than the industry's loan growth rate of 31.74%. Among them, Industrial Bank and Bank of China's deposit and loan growth rates reached 42.45%, 40.49%, and 29.22%, 48.97%, respectively, all exceeding the industry's average level.
Despite continuous expansion, the overall non-performing loan scale and non-performing loan ratio of banks basically maintained a "double decline" situation. Meanwhile, provision coverage ratios continued to rise. Industrial Bank's provision coverage ratio reached as high as 254.93%, increasing by 26 percentage points compared to the third quarter of last year.
Careful observation reveals that the reason for the growth in bank performance is largely due to the results of large provisions and asset write-downs in 2008 "feeding back." The total asset impairment losses of the seven banks in 2009 amounted to 69.56 billion yuan, a significant decrease of 58.42% year-on-year. Taking Ping An Bank as an example, the main reason for its net profit growth rate reaching 719% was the significant decrease in asset impairments and loan provisions. At the end of 2008, the company wrote off 9.4 billion yuan in bad debts and added 5.6 billion yuan in provisions, causing the asset impairment loss to increase dramatically by 257% that year. In 2009, the company's loan provisions returned to normal levels, and the asset impairment decreased by 78.52%, directly impacting profits.
Industry insiders stated that the influence of interest rate spreads and provisions on bank performance will differ this year. The recovery of interest rate spreads will enhance the performance of banks in 2010, while the significant decrease in bank provisions at the end of 2009 will cause the impact of provision expenses on performance to shift from positive to negative in 2010.
Two oil companies experience "position swapping" in profit growth:
Sinopec realized a net profit attributable to the parent company shareholders of 61.29 billion yuan in 2009, an increase of 115.5% year-on-year; it achieved operating revenue of 1,345.052 billion yuan, a decrease of 6.9% year-on-year; basic earnings per share were 0.707 yuan.
Although the drop in oil prices in 2009 caused Sinopec's exploration and production division operating profit to decrease from 66.839 billion yuan in the previous year to 19.893 billion yuan, the refining division's operating profit reached 23.046 billion yuan, vastly different from the loss of 104.68 billion yuan in 2008. Analysts pointed out that the fall in crude oil prices in 2009 and the timely implementation of the new refined oil pricing mechanism were the main reasons for the "position swapping" in the two-year performance growth of Sinopec and PetroChina. PetroChina previously announced that it realized a net profit of 103.39 billion yuan last year, a decrease of 9.7% year-on-year.
Sinopec's refining gross margin reached 5.3% last year. This indicates that the new refined oil pricing mechanism implemented starting from the end of 2008 had a significant effect on ensuring the performance of the refining sector. In the heavily loss-making year of 2008, Sinopec's refining gross margin was -10.3%, relying on 50.9 billion yuan in national subsidies to turn a profit.
In contrast, PetroChina, which focuses more on upstream businesses, saw its exploration and production business gross margin of 35.4% decrease by 9.6 percentage points year-on-year, pulling down the company's overall performance.
Additionally, due to the fall in crude oil prices, Sinopec's chemical division also saw a decrease in operating revenue but a significant increase in operating profit. The division's operating profit last year was 13.098 billion yuan, whereas it lost 13.2 billion yuan in the same period of the previous year.
In 2009, Sinopec added crude oil primary processing capacity of 22 million tons/year, catalytic cracking capacity of 1.6 million tons/year, delayed coking capacity of 3.25 million tons/year, wax oil hydrotreating capacity of 7.9 million tons/year, and catalytic gasoline adsorption desulfurization capacity of 3.6 million tons/year.
Sinopec estimates that with the global economic recovery, international oil market demand will resume growth, and the overall oil price level in 2010 may be higher than in 2009. For the whole year, the plan is to produce 42.55 million tons of crude oil and 12 billion cubic meters of natural gas domestically; process 203 million tons of crude oil and produce 121 million tons of refined oil products; sell 129 million tons of refined oil domestically; and produce 8.69 million tons of ethylene. The company plans capital expenditures of 112 billion yuan in 2010.
Top 20 in terms of operating revenue:
Securities Name Total Operating Revenue (billion yuan)
Sinopec 1,345.052
PetroChina 1,019.275
ICBC 309.454
CCB 267.184
BOC 232.198
China Unicom 158.369
China Shenhua 121.312
Minmetals Development 94.306
Huaneng International 79.742
Chalco 70.268
Suning Appliances 58.300
S-Shanghai Petrochemical 51.723
Vanke A 48.881
Midea Appliances 47.278
Foton Motor 44.840
TCL Group 44.287
Hualing Steel 41.456
CR Two Bureau 40.619
Shanghai Construction 40.188
Huadian International 36.662
Based on closing prices on March 26, the P/E ratio of 27 blue-chip companies was 16.44 times, while the average P/E ratio of the large-cap blue-chip sector over the past ten years has been 23.29 times, indicating that the current valuation of large-cap blue chips is clearly too low.
According to Wind statistics, the 2009 earnings per share (overall method) of 27 large-cap blue-chip companies was 0.46 yuan, while the earnings per share of the 808 companies that published annual reports was approximately 0.43 yuan. In terms of proportion, the operating revenue of the 27 large-cap blue-chip stocks accounted for more than 60% of all disclosed annual report-listed companies, while the realized net profit accounted for 80%. This shows that large-cap blue-chip companies are the main contributors to the net profit of listed companies and the main support force for the performance of listed companies.
Despite a decline in operating revenue in 2009, these 27 companies saw significant growth in net profit. The main reason is that the performance of bank-type listed companies that significantly impact overall performance improved markedly, such as ICBC's net profit growing by 16% year-on-year, and BOC growing by 27% year-on-year. Additionally, during the economic recovery process, listed companies paid more attention to management, leading to a noticeable decrease in costs, which contributed to the growth in net profit.
Large-cap blue-chip listed companies operate relatively steadily, and although their performance is affected by the business environment, the fluctuation amplitude is smaller. This is mainly because large-cap stocks have strong strength, better risk resistance capabilities, and stronger market control abilities, enabling them to maintain relative stability in situations of significant changes in the business environment.
From historical data, since the beginning of 2001 until now, calculated using the TTM overall method and excluding negative values, the average P/E ratio of large-cap blue-chip listed companies over nine years has been 23.29 times, far higher than the current level of 16.44 times. And the average P/E ratio of other listed companies excluding large-cap blue-chip companies during the same period has been 36.24 times. This indicates that large-cap blue-chip listed companies are currently severely undervalued, while other companies are somewhat overvalued. The reason is that in nearly a year, large-cap stocks have been neglected in the secondary market, continuously falling, while small and medium-cap stocks have been highly sought after. Taking the CSI Scale Index as an example, from August 4, 2009, to the close on March 26 this year, the Wealth Large Cap Index fell by about 20%, while the SSE Mid Cap Index fell only 6% during the same period, and the SSE Small Cap Index even rose by about 14%.
Analysts said that although the excessive undervaluation of large-cap blue-chip companies is caused by various factors and such situations have appeared frequently in history, the market has self-adjustment functions, and excessive structural imbalances will be corrected. This phenomenon is unlikely to persist for a long time, but what form the correction will take still needs observation.
Top 20 in terms of net profit:
Securities Name Net Profit (billion yuan)
ICBC 128.599
CCB 106.756
PetroChina 103.173
BOC 80.819
Sinopec 61.290
China Shenhua 30.276
Industrial Bank 13.282
Vanke A 5.330
Huaneng International 5.081
Ping An Bank 5.031
Huaxia Bank 3.760
Shanghai Port Group 3.760
Poly Real Estate 3.519
Youngor 3.264
Wuliangye Yibin 3.245
Yitai B-Share 3.141
China Unicom 3.137
Suning Appliances 2.890
Guangfa Securities 2.827
Fosun Pharmaceutical 2.498
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