Core Insights - The 2024 Global Systemically Important Banks (G-SIBs) list was published by the Financial Stability Board (FSB), confirming the predictions made earlier by Fitch Bohua regarding Chinese banks' compliance with the first phase of Total Loss-Absorbing Capacity (TLAC) requirements [2][3] - Chinese G-SIBs, including Industrial and Commercial Bank of China, Bank of China, Agricultural Bank of China, and China Construction Bank, remain in the second bucket, while Bank of Communications continues in the first bucket [2][3] Group 1: G-SIBs Compliance and TLAC Requirements - The four major Chinese banks are required to meet TLAC/RWA ratios of at least 16% by 2025 and 18% by early 2028, while Bank of Communications must meet the first phase requirements by January 1, 2027 [4] - As of the end of Q3 2024, the TLAC/RWA ratios for the four major banks were approximately 19.4% for ICBC, 19.6% for CCB, 19.2% for BOC, and 18.3% for ABC, indicating they are on track to meet the first phase requirements [9][10] - The static TLAC/RWA gap for Bank of Communications as of Q3 2024 was estimated at 71.9 billion, with potential future gaps depending on the growth rate of risk-weighted assets (RWA) [10][12] Group 2: Future Projections and Asset Growth - The average growth rate of risk-weighted assets for Chinese G-SIBs was approximately 7.7% in 2022 and 10.6% in 2023, with expectations of continued high growth rates for state-owned banks [11][12] - If the five G-SIBs maintain a profit growth rate of 3% and a payout ratio of 30%, the estimated TLAC shortfall for the second phase could reach approximately 931.9 billion, potentially increasing to 2.22 trillion if asset growth rates are higher [12][16] - The implementation of the new Capital Management Measures is expected to have a one-time impact on the growth of risk-weighted assets for G-SIBs in 2024, but overall asset growth is anticipated to remain robust [11][12]

Investment Rating - The credit outlook for the airline industry in 2025 is rated as "Low Prosperity Positive" by Fitch Bohua [39]. Core Insights - The Chinese civil aviation industry is transitioning from recovery growth in 2023 to a natural growth phase starting in 2024, with passenger demand expected to maintain single-digit growth in domestic routes and a faster recovery in international routes [39][20]. - The overall profitability of the industry is anticipated to significantly improve due to the release of demand elasticity in domestic routes and the gradual recovery of international routes, despite ongoing price pressures and operational challenges for smaller airlines [39][20]. - The report highlights that the demand for air travel is supported by rising disposable income, increased public holidays, and government policies aimed at boosting consumption [7][39]. Summary by Sections Industry Overview - In 2023, the total turnover of civil aviation reached 1,188.3 billion ton-kilometers, marking a year-on-year growth of 98.3% [2]. - For the first ten months of 2024, the total turnover increased by 26.5% to 1,238.3 billion ton-kilometers compared to the same period in 2019 [2][20]. Passenger Demand - Passenger turnover increased by 26.6% to 10,873.3 billion passenger-kilometers, with domestic routes showing a monthly growth rate of 20.6% [2][20]. - International routes are recovering but still lag behind domestic routes, with a monthly growth rate of -16.8% compared to 2019 [2][20]. Cargo Demand - Cargo turnover grew by 27.1% to 288.5 billion ton-kilometers, with international routes experiencing a significant increase of 47.3% due to strong export support [2][20]. Supply Chain and Capacity - The delivery of aircraft is facing delays due to supply chain disruptions, with expected supply growth falling short of projections [12][16]. - The report anticipates that the supply growth rate will decline to approximately 2.0% from 2024 to 2026, indicating strong supply constraints [16]. Financial Performance - The report projects that the airline industry's revenue will grow by approximately 6.0% in 2025, with a profit increase of 51.9% compared to the previous year [23][39]. - The average ticket price for domestic routes has decreased significantly, which may stimulate demand among price-sensitive customers [21][39]. Market Position and Risks - Airlines with strong market positions, effective cost control, and diverse route networks are expected to benefit from improving fundamentals, while smaller and non-listed airlines may face increased operational and financial risks [39][20]. - The report notes that the reliance on government subsidies is decreasing, indicating a recovery in operational performance [39][32].

Group 1: NPAS Market Overview - The issuance of mortgage NPAS began in 2016, with a total of 78 products issued by September 2024, accounting for 15.8% of all NPAS types[5] - The number of mortgage NPAS issuances surged to 24 in 2023, three times that of 2022, indicating a significant increase in market activity[5] - Mortgage NPAS has the highest issuance scale among all NPAS types, representing 36.8% of the total issuance volume[5] Group 2: Recovery Rates and Trends - The cumulative recovery rates for mortgage NPAS are generally higher than those for credit NPAS, with three-year cumulative recovery levels at 20%, 40%, and 50% respectively, and a historical maximum of 90%[2] - Over 50% of non-performing loans are disposed of within 60 months, with the maximum disposal rate observed at nearly 70%[3] - The cash flow recovery from disposed non-performing loans consistently exceeds 60% across all recovery periods[3] Group 3: Recovery Mechanisms - The primary recovery method for non-performing housing loans is through the disposal of mortgaged properties, with an estimated recovery rate of nearly 100% for disposed loans[4] - Approximately 80% to 90% of disposed loans rely on the sale of mortgaged properties for recovery[4] - The average monthly recovery rate decreases over time, with the first 12 months averaging 1.5%, dropping to around 0.5% by the 49th to 60th month[26] Group 4: Impact of Economic Conditions - The recovery levels of mortgage NPAS have been negatively impacted by the recent economic slowdown and declining real estate market, affecting the liquidity and value of second-hand housing[11] - Early mortgage NPAS transactions (2016-2017) showed significantly better recovery rates compared to later years due to more favorable market conditions[12]

Investment Rating - The investment rating for the Chinese chemical industry is assessed as "high risk" due to supply-demand imbalances and strong price cyclicality affecting most chemical products [2][4][6] Core Insights - The Chinese chemical industry faces dual challenges of supply-demand imbalance and strong cyclicality in product price changes, leading to significant fluctuations in corporate performance [4][6] - The assessment of the credit status of sample chemical enterprises indicates that most are concentrated in the "average" range, reflecting their operational and financial performance's susceptibility to cyclical fluctuations [2][4] - The report highlights that despite some leading companies having strong market positions, they cannot completely escape the challenges posed by the industry's inherent cyclicality [4][6] Summary by Sections Industry Overview - The Chinese chemical industry is characterized by a wide variety of products and applications, but most products currently suffer from supply-demand imbalances [2][4] - Fixed asset investment in chemical raw materials and chemical products manufacturing grew by 15.7% and 31.8% year-on-year in 2022, significantly outpacing overall economic growth [4][5] Financial Risks - Major financial risks faced by Chinese chemical enterprises include negative free cash flow due to high capital expenditures, increasing debt levels leading to high leverage, and poor short-term liquidity indicators [2][4][23] - The average EBITDA margin for sample enterprises is around 12%, with nearly half recording negative free cash flow ratios, reflecting the impact of high investment growth [24][25] Operational Risks - The operational risks are assessed based on product mix fundamentals, market position, diversity, and cost position [11][20] - Companies with strong pricing power and high entry barriers tend to have a more prominent market position, while those in highly competitive segments face significant challenges [14][20] Sample Analysis - The report analyzes 36 sample chemical enterprises, covering various segments such as basic chemicals, specialty chemicals, agricultural chemicals, and industrial gases [9][10] - The ownership structure of the sample includes 55% private enterprises, 25% local state-owned enterprises, and 17% central state-owned enterprises, reflecting the diverse nature of the industry [10][12]

Core Insights - The report predicts that the grouping of Chinese G-SIBs will remain stable in 2024, with major state-owned banks maintaining their positions in the second group and the Bank of Communications in the first group [1][8] - The total number of G-SIBs is expected to remain at 29, with potential changes in the grouping of certain institutions, particularly a possible downgrade for American banks [7][20] - Agricultural Bank of China is projected to have the highest score increase among Chinese G-SIBs, rising by 21 points to 256, while other major banks like ICBC and Bank of China are expected to see slight declines in their scores [8][12] Summary by Sections Global Systemically Important Banks (G-SIBs) Overview - The G-SIB framework was established to mitigate risks posed by large banks during financial crises, requiring them to hold higher capital based on their group classification [3][4] - The report indicates that the 2024 G-SIBs list will be published in November 2024, with the current predictions aligning closely with previous assessments [7][8] Chinese G-SIBs Performance - The five major state-owned banks in China have consistently been included in the G-SIBs list since its inception, with their group classifications varying over the years [2][8] - The Agricultural Bank of China has shown significant growth, with its score increasing by 21 points, while ICBC and Bank of China are expected to see declines of 8 and 7 points, respectively [8][12] Factors Influencing Scores - Key factors affecting the scores of Chinese G-SIBs include growth in size, interbank asset and liability expansion, and payment amounts processed [12][13] - Exchange rate fluctuations have negatively impacted the scores of Chinese banks, with the depreciation of the RMB against major currencies leading to a decrease in scores by 4-8 points [13][18] Predictions for Other Regions - In the European Banking Union (EBU), most banks are expected to see score increases, driven primarily by exchange rate changes, while Deutsche Bank and Société Générale are projected to continue their downward trends [14][15] - North American banks are expected to maintain their number in the G-SIBs list, but most are likely to experience score declines, with American Bank potentially dropping from the third to the second group [20][21] Conclusion - The report emphasizes the stability of Chinese G-SIBs in the upcoming year, with Agricultural Bank of China leading in score improvements, while external factors such as exchange rates and regulatory changes continue to play a significant role in the overall assessment of global banks [8][13][20]

Economic Growth and Policy Impact - China's GDP growth rate for Q3 2023 is 3.6% on a seasonally adjusted annualized basis, up from 2.0% in Q2, indicating a recovery trend[1][2] - The government has introduced a series of economic stimulus policies since late September, which are expected to boost consumer confidence and spending, raising the GDP growth forecast for 2024 from 4.8% to 4.9%[1][6] Industrial and Investment Trends - Industrial production maintained a growth rate of 5.8% year-on-year in the first three quarters, supported by the "two new" policies and resilient exports[7] - Fixed asset investment grew by 3.4% year-on-year in the first three quarters, with significant improvements in infrastructure, manufacturing, and real estate sectors observed in September[23][24] Consumer Behavior and Retail Sales - Social retail sales increased by 3.3% year-on-year in the first three quarters, with a notable rise in September to 3.2%, driven by consumption upgrade policies[12][15] - The average disposable income per capita reached 30,941 yuan, reflecting a nominal growth of 5.2% year-on-year, while actual growth adjusted for inflation was 4.9%[16][19] Real Estate Market Dynamics - Real estate development investment decreased by 10.1% year-on-year in the first three quarters, but the decline has been narrowing, with a 9.4% drop in September[27][28] - The real estate market is showing signs of recovery, with a continuous increase in the development index over six months, indicating a gradual stabilization[28] External Trade Challenges - China's exports fell by 2.4% year-on-year in September, a significant drop from 8.7% in the previous month, influenced by external demand weakening and adverse weather conditions[29][30] - The trade surplus for September was recorded at $81.71 billion, down from $91.02 billion in August, reflecting the challenges in the export sector[29]

Economic Overview - China's GDP grew by 4.6% year-on-year in Q3 2023, slightly lower than Q2 by 0.1 percentage points[3] - Nominal GDP growth was 4.04%, 0.56 percentage points lower than real GDP growth, with the GDP deflator index remaining negative for six consecutive quarters but showing signs of narrowing[3] - Fixed asset investment growth accelerated in September, with infrastructure, manufacturing, and real estate showing improvements, particularly broad infrastructure investment which saw significant growth[3] Policy Impact - A series of economic stimulus policies introduced by the government since late September have positively impacted market confidence and economic activity, leading to an upward revision of China's 2024 GDP growth forecast from 4.8% to 4.9%[5] - The government has implemented measures to support local governments in managing debt risks, including increasing debt limits and replacing high-cost debt with low-interest bonds, which is expected to alleviate short-term repayment pressures[6] Real Estate Sector - The real estate market is showing signs of recovery, with the real estate development prosperity index rising to 92.41 in September, indicating a gradual improvement after six months of slight increases[5] - New policies have led to a significant increase in transaction volumes for both new and second-hand homes, with a 43.8% increase in transaction area compared to early September[5] - The government has introduced measures to support the recovery of the real estate market, including the use of special bonds to recover idle land and purchase existing properties[9] Steel Industry - The steel industry is expected to see marginal improvements in the short term due to government stimulus policies, with crude steel production in the first three quarters of 2024 down 3.6% year-on-year[12] - Steel prices have risen significantly, with rebar prices reaching 3,980 RMB/ton, a more than 20% increase from the low of 3,205 RMB/ton in August[14] Solar Industry - The recent solar industry meeting highlighted the need for cooperation among companies to address issues of severe supply-demand imbalance and unhealthy competition, particularly in light of trade disputes affecting exports[16] - The industry is focusing on enhancing internal cooperation and reducing excess capacity to stabilize the market amidst external challenges[16]

Investment Rating - The report maintains a stable outlook for the commercial banking sector, with expectations of slight narrowing of net interest margins in 2025, but within a controllable range [1][4]. Core Insights - The comprehensive policy package is expected to stimulate overall demand, benefiting loan growth stability for commercial banks, while the reduction in existing mortgage rates may help mitigate early repayment risks and positively impact mortgage asset quality [1][4]. - The report highlights that the net interest margin pressure on commercial banks is relatively controllable, despite the anticipated decline due to lower mortgage rates and LPR adjustments [4][8]. - The overall asset quality of commercial banks is improving, with a notable decrease in the non-performing loan (NPL) ratio for corporate real estate loans for the first time in three years [1][20]. Summary by Sections Performance Overview - In the first half of 2024, the total asset growth rate for commercial banks was approximately 7.3%, lower than the same period last year, with varying growth rates across different types of banks [5][38]. - The net interest margin for listed banks decreased to 1.61%, down 14 basis points year-on-year, indicating ongoing pressure on interest income [15][36]. Loan Quality and Asset Management - As of June 2024, the non-performing loan balance for commercial banks was about 3.3 trillion yuan, with a year-on-year growth of 4.4%, reflecting increased efforts in asset quality management [18][20]. - The report notes that the NPL ratio for commercial banks improved to 1.56% by the end of Q2 2024, a slight decrease from the beginning of the year [20][24]. Capital Adequacy - The capital adequacy ratio for commercial banks reached a historical high, with core Tier 1 capital adequacy ratio improving to 10.7% as of June 2024 [36][38]. - The issuance of subordinated debt and perpetual bonds is expected to remain high due to the upcoming redemption period for existing bonds, indicating a sustained demand for external capital [40][43]. Market Dynamics - The report emphasizes that the reduction in deposit rates is expected to partially offset the negative impact of lower mortgage rates on net interest margins, although it will not fully compensate for the LPR reductions [4][8]. - The ongoing economic slowdown is creating pressure on loan quality, particularly in certain regions, but the overall asset quality is expected to remain stable due to proactive measures by banks [24][25].

Overview - The report provides insights into the NPAS index for the interbank market, focusing on various asset classes including mortgage loans, credit cards, consumer loans, and small micro loans [2][4]. Mortgage NPAS - The initial asset scale for mortgage NPAS decreased from 152.5 billion in Q4 2023 to 97.84 billion in Q2 2024, indicating a significant contraction in the market [2]. - The current recovery sentiment dropped sharply to 2.6 in Q2 2024 from 10.2 in Q1 2024 and 42.9 in Q4 2023, reflecting a deteriorating recovery environment [2]. - Cumulative recovery sentiment also declined to 28.9 in Q2 2024 from 35.3 in Q1 2024 and 49.2 in Q4 2023, suggesting ongoing challenges in asset recovery [2][5]. Credit Card NPAS - The initial asset scale for credit card NPAS was 206 billion in Q2 2024, down from 258.84 billion in Q4 2023 [2]. - The current recovery sentiment for credit cards was 36.6 in Q2 2024, slightly down from 38.8 in Q1 2024 and 44.4 in Q4 2023, indicating a stable but declining trend [2]. - Cumulative recovery sentiment remained relatively stable at 31.0 in Q2 2024 compared to 31.4 in Q1 2024 and 38.5 in Q4 2023 [2][9]. Consumer Loan NPAS - The initial asset scale for consumer loan NPAS was 74.5 billion in Q2 2024, a decrease from 172.5 billion in Q4 2023 [2]. - The current recovery sentiment for consumer loans was 33.3 in Q2 2024, down from 37.5 in both Q1 2024 and Q4 2023, indicating a downward trend [2]. - Cumulative recovery sentiment increased to 22.2 in Q2 2024 from 17.6 in Q4 2023, suggesting some improvement in long-term recovery despite short-term challenges [2][11]. Small Micro Loans: Credit and Auto Pledge - The initial asset scale for small micro loans (credit and auto pledge) was 212.6 billion in Q2 2024, down from 247.9 billion in Q1 2024 [2]. - The current recovery sentiment dropped to 25.0 in Q2 2024 from 35.3 in Q1 2024, reflecting a significant decline [2]. - Cumulative recovery sentiment also decreased to 25.0 in Q2 2024 from 29.4 in Q1 2024, indicating ongoing difficulties in asset recovery [2][14]. Small Micro Loans: Other Pledge Types - The initial asset scale for small micro loans (other pledge types) was 140.3 billion in Q2 2024, down from 185.6 billion in Q4 2023 [2]. - The current recovery sentiment surged to 50.0 in Q2 2024 from 27.8 in Q1 2024, indicating a strong recovery performance [2]. - Cumulative recovery sentiment increased significantly to 66.7 in Q2 2024 from 55.0 in Q4 2023, suggesting a robust recovery trend [2][17].

Industry Overview - The European new car market showed significant recovery in 2023, with passenger car sales reaching 12.847 million units, marking the first positive growth since the COVID-19 pandemic [2] - The Chinese new car market was approximately twice the size of Europe's, with sales of 26.063 million units in 2023 [2] - The European new car market is highly concentrated, with the top five markets (Germany, UK, France, Italy, and Spain) accounting for about 70% of total sales, and the top five manufacturers holding a combined market share of 60-70% [2] Used Car Market Dynamics - The European used car market is significantly larger and more active than the new car market, with sales in the top five markets nearly three times that of new car sales [3] - The used car market in Europe accounts for about 10% of the total car stock, with the UK reaching as high as 20%, compared to less than 5% in China [3] - Used car prices in Europe remain at historically high levels, driven by supply chain disruptions during the pandemic, although prices have slightly declined since 2023 [3] Asset-Backed Securities (ABS) Market - The proportion of used car assets in European ABS markets is increasing, with manufacturer-affiliated transactions typically having 20-60% used car assets, while non-manufacturer transactions tend to have higher proportions [7] - The used car financing market is steadily growing, influencing the asset composition of European ABS markets [7] Default and Recovery Performance - Used car assets generally exhibit higher cumulative default rates compared to new car assets, with more significant historical volatility, reflecting lower average credit quality of used car borrowers [10] - Recovery performance for defaulted assets primarily relies on the disposal of collateral vehicles, with recovery rates influenced by used car market prices [12] - Recovery rates for defaulted assets are generally faster, with most recoveries occurring within six months of default [12] Market Share Analysis - Volkswagen Group leads the European new car market with a 25.9% share, followed by Stellantis (16.6%) and Renault Group (9.7%) [16] - Hyundai Group and Toyota Group hold 8.6% and 6.9% market shares, respectively, while BMW Group and Mercedes-Benz account for 7.1% and 5.5% [16] Sample Data Overview - The report includes 12 sample datasets from five major European car manufacturers across five countries, covering loan and lease assets with varying default and recovery rates [17]