Dongguan Securities·2025-09-05 05:14Investment Rating - The report maintains an "Overweight" rating for the banking industry [1][3][5] Core Insights - The banking sector has shown signs of performance recovery, with operating revenue and net profit growth turning positive in the first half of 2025. Total operating revenue reached CNY 2.92 trillion, a year-on-year increase of 1.04%, while net profit attributable to shareholders grew by 0.80% [3][14][24] - The average return on equity (ROE) for listed banks remains above 10%, standing at 10.99%, although it has decreased by 0.56 percentage points year-on-year [3][26] - The report highlights a shift in loan demand, with corporate loans showing strength while retail loans remain weak. The total loan amount increased by 7.96% year-on-year, with corporate loans accounting for 66.74% of new loans [3][39] - The net interest margin decline has slowed, with the weighted average net interest margin at 1.43%, down 13 basis points year-on-year, indicating reduced pressure on funding costs [3][50] Summary by Sections 1. Performance Recovery and Non-Interest Income - The banking sector's revenue growth turned positive, driven by a recovery in the bond market, with non-interest income increasing by 10.76% year-on-year in the first half of 2025 [3][20] - The second quarter saw a significant improvement in revenue growth, with a year-on-year increase of 3.91%, marking a turnaround from negative growth [15][20] - Individual banks showed varied performance, with some achieving substantial revenue growth, while others lagged behind [21][25] 2. Loan and Deposit Trends - The total assets of listed banks grew by 9.60% year-on-year, with city commercial banks leading in asset expansion [3][31] - The proportion of demand deposits has declined to a historical low, with a shift towards time deposits [3][50] - The report notes a cautious approach to retail lending due to rising credit risks, with banks focusing on corporate lending to support economic transformation [39][47] 3. Interest Margin and Cost of Liabilities - The average net interest margin has shown a reduced rate of decline, indicating improved conditions for banks [3][50] - The cost of liabilities has generally decreased, contributing to a more favorable operating environment for banks [3][50] 4. Asset Quality and Provision Coverage - The average non-performing loan (NPL) ratio for listed banks was stable at 1.23%, with a slight year-on-year improvement [3][4] - The provision coverage ratio has decreased slightly, reflecting some banks' decisions to release provisions to boost profits [3][4] 5. Investment Recommendations - The report suggests focusing on three main investment lines: high dividend, low valuation banks such as ICBC, ABC, BOC, and CCB; banks with regional advantages and strong performance certainty like Chengdu Bank and Hangzhou Bank; and banks benefiting from retail business recovery like China Merchants Bank and Industrial Bank [5][5]