Changjiang Securities·2025-05-14 08:41Investment Rating - The report maintains a "Positive" investment rating for the banking sector [10] Core Insights - The report highlights a positive outlook for active funds gradually correcting the long-standing underweight in bank stocks. With stable fundamentals, the combination of high dividend logic, expansion of passive funds, and increased allocation by active funds is expected to drive the continuous recovery of undervalued bank stocks [2][6] - The market will begin to focus on quality bank stocks at low valuations, particularly those that have been suppressed by various factors. Three main categories of banks are identified for potential investment: 1) Quality city commercial banks previously pressured by convertible bonds; 2) Quality banks with clear pro-cyclical labels; 3) State-owned banks with low valuations affected by short-term factors [2][6] Summary by Sections Category 1: Quality City Commercial Banks - Notable examples include Hangzhou Bank and Nanjing Bank, which have lagged in performance despite strong fundamentals. Nanjing Bank's stock price has reached the forced redemption price of its convertible bonds, with a static PB (LF) valuation of only 0.73x, the lowest among quality banks in the Yangtze River Delta. Hangzhou Bank, with a PB (LF) valuation of 0.85x, is recognized as a leader in asset quality and profit growth, indicating significant undervaluation [7] Category 2: Pro-Cyclical Quality Banks - Examples include Changshu Bank and Ningbo Bank, which have faced valuation pressure due to economic downturn expectations. Despite a 44% and 16% contraction in PB valuations for Ningbo Bank and Changshu Bank respectively, both banks maintain strong performance metrics. If retail loan asset quality stabilizes, these banks are expected to see significant valuation recovery [8] Category 3: Low-Valuation State-Owned Banks - Traffic Bank and Postal Savings Bank are highlighted as state-owned banks with lagging performance and low PB valuations. Traffic Bank's stock has been stagnant due to concerns over fiscal injections diluting dividend yields, yet it is projected to maintain positive growth in 2025. Postal Savings Bank faces similar pressures but could benefit from economic recovery and improved asset quality [8]