A Study On Phenomenon Of Listed Banks’High-profitability And Low Share Pricing In China

A-share listed companies publish a semi-annual report.Although most listed companies meet the decline in performance, banks achieved a total net profit of545.229billion yuan, a year-on-year growth of18%. Good performance does not seem to be reflected in the capital market. In the first half of2012, the Industrial and Commercial Bank’s share price fell by6.40%, Construction Bank by6.67%, China Merchants Bank by6.43%, and Huaxia Bank’s share price fell by14.84%. Notwithstanding the foregoing, the phenomenon that high profitability and low share prices in banking stocks occurs. Why banks achieved high profitability, but the stocks’ price is low? This is the problem what this paper is to study.The non-performing loan ratio is a "time bomb" hidden in the banking system to make the performance of banks have fallen sharply once activated at any time. The price of the stock market is the expected response of investor psychology. In this paper, we search industries’(a total of12industry classification) financial data from2008to2011,starting from the angle of the repayment capacity of the industry, to study the expected risk in the banking sector.First, the paper reviews the development course of China’s banking and stock pricing theory---valuation theory. According to the valuation theory, for the banking sector’s low stock price we make two assumptions:First, the banks’expected growth rate slows down, the banks are expected to increase in NPLs.After that this paper analyzes the influencing factors of the high profitability of the banks, and collects revenue growth from2008to2011, the banks’expected growth rate slows down, so as to verify the assumptions.Then we collect financial data of various industries, analyzing the profitability of the industry and the long-term solvency levels via EXCEL.We find that their repayment capacity decline, increasing the banks’loans risk.Finally, we select the steel industry as the representative to study the expected risk in the banking sector, because the steel industry is a capital-intensive industry, with a large bank loans. The paper analyzes the current situation of the steel industry and the financial indicators such as profitability, long-term solvency, and find that solvency and profitability of the steel industry as a whole is on the decline so that we think that the steel industry’s expected non-performing loans will rise sharply.