According to choice statistics, there are currently 14 banks with provision coverage ratios exceeding 300%, and three banks with provision coverage ratios exceeding 500%. High provision coverage ratios have become a common situation among listed banks.

The provision rate in the financial statements directly affects the profits of the current period. What is the logic and "story" behind the high batch provisions of listed banks?

There is a big gap in bank provision ratios

Choice and other third-party data show that as of the end of June this year, except for Shanghai Rural Commercial Bank, which has not released its semi-annual report, the provision coverage rate reached 300% There are already 14 banks listed above.

The 14 banks are Bank of Hangzhou, Bank of Changshu, Bank of Ningbo, China Merchants Bank, Bank of Wuxi, Postal Savings Bank, Zhangjiagang Bank, Bank of Nanjing, Bank of Chengdu, Bank of Suzhou, Bank of Xiamen, and Sunong Bank. , Bank of Shanghai, Yunong Commercial Bank.

Among them, Bank of Hangzhou, Bank of Changshu and Bank of Ningbo are far ahead, with provision coverage ratios of all three being higher than 500%.

In addition, the provision coverage ratios of four banks, China Merchants Bank, Wuxi Bank, Postal Savings Bank and Zhangjiagang Bank, all exceed 400%.

In addition, as of the end of June this year, there were three banks in the industry with provision coverage ratios below 150%, namely Minsheng Bank, Shanghai Pudong Development Bank, and Bank of Communications. Of course, the provision ratios of these three companies are within the scope allowed by regulations.

Bank of Hangzhou: tripled in less than 5 years

Among the above-mentioned banks, Bank of Hangzhou is the most prominent “dark horse”.

At the end of 2016, Hangzhou Bank’s provision coverage ratio was only 186.76%, not far from the “warning line” of 150% that year.

But in the following years, the bank’s provision coverage ratio increased rapidly. From 2017 to the end of 2020, the bank's provision coverage ratios were 211.03%, 256.00%, 316.71%, and 469.54% respectively. Especially in 2019 and 2020, the growth in provision coverage ratio was at the forefront of the industry.

At the end of the second quarter of this year, the provision coverage ratio of Hangzhou Bank increased significantly by 31.80 percentage points from the previous quarter to 530.43%, surpassing the permanent "champion" Bank of Ningbo and ranking first among listed banks.

At the same time, the bank's loan-to-loan ratio also reached 5.18%, ranking first among listed banks.

Similarly, there is Changshu Bank. As of the end of the second quarter of this year, the bank's provision coverage ratio reached 521.67% and the provision-to-loan ratio was 4.69%, ranking second among listed banks.

Bank of Ningbo: ranked first for 5 consecutive years

When it comes to provision coverage ratio, Bank of Ningbo can be said to be the most beautiful "boy" in recent years.

Since 2015, the bank’s provision coverage ratio has been ranked first among listed banks, and at the end of 2017, it was the first to be close to 500%.

During the same period, the bank's non-performing loan ratio has always been below 1%. Except for a slight increase of 1 percentage point at the end of last year, it has basically been declining. As of the end of June this year, Bank of Ningbo's non-performing loan ratio was 0.79%, the same as the end of the previous year, maintaining a low level among listed banks; special mention loans accounted for 0.39%, a decrease of 0.11 percentage points from the end of the previous year.

At the same time, the bank's net profit growth rate has basically remained at the forefront of listed companies in recent years.

A recent research report from Guosheng Securities stated that some banks have increased the provision of non-credit assets since 2020. For example, China Merchants Bank and Bank of Ningbo have the best asset quality among their peers. And the "broad provisions" after considering investment assets are fully provided, and the ratios of asset impairment provisions/(loans + non-standard + credit bonds) are 5.11% and 3.64% respectively, and the overdue rates of these two banks are respectively 1.02%, 0.84%. Provisions are sufficient. If there are risk exposures in the future, we have the ability to deal with them and maintain the stable release of profits.

Another perspective on bankers' bottom line

When observing bankers' bottom line, in addition to the provision coverage ratio, the provision-to-loan ratio is also very important.

The so-called loan-to-loan ratio is the ratio of the provision for impairment to the total loan amount. It can be thought of as the amount of impairment provision a bank has prepared for every RMB 100 of loan.

Take Bank of Hangzhou as an example: the loan-to-loan ratio in 2020 is 5.18%, which means that for every 100 yuan of loans issued by the Postal Savings Bank, an impairment provision of 5.18 yuan will be provided as a protective cushion.

Wind data shows that as of the end of the first half of this year, except for Shanghai Pudong Development Bank (2.48%) and Bank of Communications (2.39%), the loan-to-loan ratios of other banks were all higher than 2.5%. There are 12 companies with loan-to-loan ratios above 4%. The details are shown in the figure:

Summarizing the above data, we can also find that no matter what angle we use to observe it, the list of banks with rich financial assets is always approximate.