ZHONGTAI SECURITIES·2025-05-20 12:52Investment Rating - The industry investment rating is "Overweight (Maintain)" [5] Core Viewpoints - The current banking sector rally is based on a two-phase logic: the first phase focuses on the certainty of bank stocks, while the second phase involves a "rush" by public funds that are underweight in banks. The outlook for bank stocks remains strong due to their stability and dividend value in an uncertain economic environment [7][10][12]. Summary by Sections 1. Two-Phase Logic of the Current Banking Rally - The first phase emphasizes the relative certainty of bank stocks amid economic uncertainty, highlighting the resilience and dividend value of the banking sector [7][10]. - The second phase indicates a "rush" by active funds that are underweight in bank stocks, with a reported underweight difference of 8.33% in Q1 2025, the largest among all sectors [7][12]. 2. Outlook for the First Phase Logic - The certainty of bank stocks is a strong logic, with expectations of continued market activity supported by favorable policies. The banking sector is transitioning from a "pro-cyclical" to a "weak-cyclical" phase due to three main reasons: increased correlation with fiscal policies, a stable customer base supported by national credit, and a controlled risk release environment [7][21][22]. 3. Stability of Banking Sector Performance - The banking sector shows strong fundamental resilience, with a non-performing loan generation rate of 0.64% in Q1 2025, indicating a slight improvement. The provision coverage ratio stands at 237.99%, ensuring stability in asset quality and profit growth [12][13][19]. 4. Outlook for the Second Phase Logic - The second phase requires monitoring of policy details and the behavior of public funds. The "Action Plan for Promoting High-Quality Development of Public Funds" is expected to shift fund allocations towards larger weight sectors, potentially increasing capital inflows into the banking sector [20][22]. 5. Investment Recommendations - The report suggests focusing on banks with regional advantages and strong certainty, particularly city commercial banks in regions like Jiangsu, Shanghai, and Chengdu, as well as large banks with high dividends such as Agricultural Bank, Construction Bank, and Industrial and Commercial Bank [20][24].