[看好评级]BANKS：TIGHTER CREDIT CONDITIONS AMID FINANCIAL DELEVERAGING
Weaker-than-expected TSF. On 13 April, the People’s Bank of China （PBoC） released March’s monetary statistics. Despite newloans of CNY1.12trn, which were in line with expectations, total social financing （TSF） dropped 37% YoY to CNY1.33trn, or 26% belowexpectations. M2 decelerated 0.6ppts to 8.2% YoY, and deposits growth picked up slightly to 8.7% YoY.
Rising corporate borrowing suggests improving credit demand. Mid- and long-term corporate loans accounted for 50% of newloans in 1Q18 （vs 37% in 4Q17）。 This, along with an improving Purchasing Managers Index （PMI）， reflects healthy production activitiesand solid credit demand. Meanwhile, mortgage growth slowed further, amid controls on household leverage.
Financial deleveraging continues. After subdued growth in February, entrusted loans, trust loans, and acceptance bills all declined（see our 12 March report, Ongoing Risk Campaign To Curb Off-BS Growth）。 Off balance sheet financing may retreat further, as thenew asset management rule was reportedly approved by authorities in late-March and is likely to be announced soon.
A revival in bond financing. Thanks to easing liquidity conditions in March, net bond issuance recovered strongly to CNY344bn,accounting for 25.9% of TSF （vs 6.2% in February）。 This also suggests healthy credit demand and a shift in financing channels amid aclampdown on shadow banking and the tight lending quota for banks.
Intensifying deposit competition. According to Securities Times, the PBoC may loosen its guidance on the cap of commercial banks’
deposit pricing, in order to facilitate interest rate liberalisation in China. Once it is implemented, banks are likely to lift their effectivedeposit rates to boost funding growth. This may add pressure to NIM and earnings growth, especially for smaller banks.
Remain OVERWEIGHT. Against the backdrop of ongoing financial deleveraging and policy tightening, big banks should stand out interms of funding competition and credit expansion. Our Top Picks are Agricultural Bank of China （ABC） and Bank of China （BOC）。
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