ZHESHANG SECURITIES·2025-10-16 08:48Investment Rating - The industry investment rating is maintained as "Positive" [3] Core Insights - It is expected that large banks will increase their bond purchases while small banks will sell bonds to improve performance [3] - The behavior of banks in the secondary bond market is influenced by three main factors: passive allocation behavior, active allocation behavior, and risk indicator constraints [3][9][10] - In the first half of 2025, the core revenue growth rates for different types of banks varied, with state-owned banks showing a slight decline while city commercial banks experienced growth [18][24] Summary by Sections 1. Factors Influencing Bank Bond Trading Behavior - Passive allocation behavior involves using remaining liquidity to participate in the secondary market, enhancing fund utilization [9] - Active allocation behavior is driven by performance pressures, leading banks to adjust positions to enhance revenue or mitigate risks [10] - Risk indicator constraints require banks to adjust their bond maturity structure based on liquidity and interest rate risks [11] 2. Reasons for Significant Bond Selling in March to June 2025 - The primary reason for the significant bond selling was the performance pressure on small banks, which needed to realize gains from OCI/AC accounts to improve earnings [12] - Remaining liquidity did not significantly decrease during this period, indicating that the selling behavior was more related to active management rather than passive allocation [13] - The performance pressure was particularly acute for small banks, which had to sell older bonds to support their revenue [17][18] 3. Different Motivations for Bond Trading Among Bank Types - State-owned banks are primarily constrained by remaining liquidity and are expected to focus on buying bonds [3] - Joint-stock banks are experiencing significant performance pressure, leading to a reduction in AC account sizes [3] - City and rural commercial banks are also facing performance pressures, resulting in a contraction of both AC and OCI account sizes [3] 4. Future Expectations for Bank Bond Selling - In the coming months, large banks are expected to focus on buying bonds, while small banks may continue to sell older bonds to improve their performance [3] - The passive allocation behavior is anticipated to remain strong due to increased remaining liquidity, while small banks may increase their selling activities [4] - Risk indicator pressures are expected to ease as supply pressures diminish, leading to a reduction in bond selling by state-owned banks [4] 5. Investment Recommendations - The report recommends focusing on small banks in economically developed regions and stable high-dividend large banks, with specific recommendations for banks such as Shanghai Pudong Development Bank and Nanjing Bank [4]