Orient Securities·2025-05-21 02:23Investment Rating - The report maintains a "Buy" rating for the banking sector, indicating a relative strength of over 5% compared to the market benchmark index [6][19]. Core Insights - The banking sector is expected to benefit from a period of intensive policy implementation aimed at stabilizing growth, with monetary easing leading the way, followed by fiscal measures that are anticipated to significantly impact the banking fundamentals in 2025 [2][6]. - The downward adjustment of deposit rates is expected to provide important support for bank net interest margins, despite short-term pressure from broad interest rate declines [2][6]. - 2025 is projected to be a year of solidifying asset quality for banks, with improved risk expectations in real estate and urban investment properties underpinned by policy support [2][6]. Summary by Sections Investment Recommendations and Targets - Focus on two main investment lines: high-dividend stocks and city commercial banks with strong fundamentals and regional advantages [7]. - Recommended banks include Agricultural Bank of China, Industrial and Commercial Bank of China, China Merchants Bank, and others [7]. Interest Rate Adjustments - On May 20, 2025, the 1-year and 5-year Loan Prime Rate (LPR) were both lowered by 10 basis points, with state-owned banks also reducing deposit rates across various terms [6][14]. - The impact of the recent interest rate cuts on bank net interest margins is expected to be neutral, with a projected increase of 3.1 basis points for listed banks in 2025 [6][14]. Deposit Rate Trends - The report highlights a trend of decreasing deposit rates since October 2024, with significant reductions across various terms, indicating a shift in the banking landscape [8][9]. - Despite the pressure from high-interest deposits maturing, the overall deposit growth remains stable, with a net increase of 1.12 trillion yuan in new resident deposits from January to April 2025 [6][14]. Asset Quality and Risk Management - The report anticipates a significant improvement in asset quality for banks in 2025, particularly in sectors previously under stress, such as real estate [2][6]. - The ongoing adjustments in deposit rates are expected to mitigate the risks associated with deposit disintermediation, with a controlled outflow of deposits to non-bank financial products [6][14].