Xin Lang Zheng Quan·2025-11-19 10:25Core Viewpoint - The banking sector is entering a new cycle of stable profitability, with long-term capital inflows ongoing, and a positive outlook for banks is emphasized [1][4]. Group 1: Investment Strategy - The banking sector has transitioned from a "broken net" state to a deep valuation pressure, currently at approximately 0.7 times price-to-book (PB) ratio, with previous lows at 0.49 times PB [1]. - The current environment of low interest rates is driving capital towards dividend-paying sectors, with the banking index's dividend yield at about 4.3%, significantly higher than the ten-year government bond yield [2]. - Long-term capital, particularly from insurance funds, is increasingly allocated to banks, with potential inflows estimated at around 600 billion yuan if 40% of new funds are allocated to banks [2]. Group 2: Expected Changes in Banking Fundamentals - The central bank aims to support banks in stabilizing net interest margins, which may lead to a slight year-on-year increase in interest margins in 2026 [3]. - The importance of high provisions is highlighted, as banks face narrowing space for balancing risk digestion and profit replenishment, focusing on banks with low non-performing loans and high provision ratios [3]. - Some smaller banks may face revenue growth challenges due to high base pressures in their capital market businesses, impacting their non-interest income [3]. - Capital adequacy will become a focal point, with banks that have strong internal capital and financial stability being better positioned for stable lending and dividends [3]. Group 3: Market Outlook - If the macro environment in 2026 sees a gradual recovery in Producer Price Index (PPI) and marginal increases in long-term interest rates, it will create favorable operating conditions for banks [4]. - Even under economic pressure, banks are expected to maintain clear risk thresholds and stable dividend expectations, making them attractive dividend assets in a low-interest-rate environment [4].