Zhi Tong Cai Jing·2025-10-21 02:42Core Viewpoint - Morgan Stanley believes that domestic bank stocks will present good investment opportunities in the fourth quarter and the first quarter of next year after experiencing seasonal adjustments in the third quarter [1] Group 1: Market Conditions - The Chinese financial system is undergoing an unprecedented change, achieving a "natural cycle bottom" without large-scale stimulus or further monetary easing [3] - The current credit growth is more aligned with economic growth, with social financing growth slowing to 8.7% and loan growth to 6.4% as of September 2025, which stabilizes bank asset returns [4][6] - M1 and corporate current deposit growth have accelerated since early 2025, indicating improved corporate liquidity and confidence, suggesting that risks are easing [6][8] Group 2: Industry Transition - The banking sector is transitioning from a risk control model to a development model, with high-risk asset ratios expected to decline from 9.2% in 2024 to around 3% in the coming years, significantly reducing risk premiums for financial stocks [11][13] - The demand for credit is expected to grow steadily at 5-6% annually, slightly above the projected nominal GDP growth of about 4%, supporting reasonable asset returns and stable net interest margins for banks [13] Group 3: Investment Drivers - Four key factors are expected to support bank stock performance in the fourth quarter: - Dividend-driven capital inflow as banks typically pay mid-term dividends at the end of December and early January, attracting strong demand from institutional investors [14] - Improvement in bank fundamentals, with expected mild pressure on net interest margins and a rebound in fee income due to active capital markets [15] - Supportive policies, including a newly introduced 500 billion RMB structural financial policy tool aimed at supplementing project capital and supporting credit demand without pressuring loan yields [15] - A stable interest rate environment, with minimal adjustments to the loan market quotation rate (LPR) in 2025, which alleviates concerns about sustained pressure on interest spreads [17] Group 4: Investment Opportunities - Banks exhibiting superior profit rebound potential and robust dividend capabilities in the current environment are seen as quality choices to capture opportunities in this "new era" [20]