Bank of America(US:BAC) Tianfeng Securities·2025-06-18 08:15Investment Rating - The industry rating is "Outperform" (maintained) [4] Core Insights - The report indicates that the decline in loan interest rates is expected to slow significantly in 2025 due to various constraints from both the central bank and commercial banks [2][3][35] - The loan pricing mechanisms have evolved, with LPR (Loan Prime Rate) becoming the primary benchmark, and the marketization of loan rates has largely been achieved [10][12][15] - The report highlights three phases of loan interest rate trends since the LPR reform, emphasizing the rapid decline in rates during 2020 and the subsequent stabilization in 2024 [25][27][34] Summary by Sections 1. Loan Pricing Principles and Historical Review - Loan pricing in China has transitioned to a market-based system, with administrative controls being phased out since 2013 [10][11] - The LPR reform has established a new pricing mechanism, balancing policy guidance and market autonomy [12][15] - The report notes a significant increase in the proportion of loans priced below LPR since the reform, indicating a shift in market dynamics [15] 2. Central Bank's Perspective on Current Loan Pricing Constraints - The central bank's focus on maintaining bank interest margins suggests limited room for further reductions in loan rates in 2025 [2][35] - Regulatory self-discipline remains a factor in loan pricing, with expectations for banks to adhere to certain pricing guidelines [36][37] 3. Commercial Banks' Perspective on Current Loan Pricing Constraints - Commercial banks are facing pressure as loan rates approach 3%, leading to thin profit margins and potential losses in credit operations [3][38] - Despite easing funding costs, rising credit risks are impacting the profitability of loan products [42] 4. Market Implications Based on Loan Rate Trends - The report anticipates limited declines in both LPR and deposit rates in 2025, affecting banks' asset-liability management strategies [47][50] - The investment value of bank stocks is expected to remain high, particularly for quality regional banks and stable state-owned banks, due to their high dividend yields during periods of declining interest rates [4][47]