KAIYUAN SECURITIES·2025-12-08 05:46Investment Rating - The industry investment rating is optimistic (maintained) [1] Core Insights - The report indicates that the ΔEVE (Economic Value of Equity) indicator for major banks has decreased compared to 2024, with some banks potentially exceeding the regulatory requirement of -15% [4][15] - The report highlights that for every 20 trillion yuan of local government bonds undertaken by banks, the ΔEVE/ Tier 1 capital ratio deteriorates by 0.65% to 1.73% [24][25] - The current regulatory buffer allows major banks to undertake approximately 666.8 billion yuan of 30-year local government bonds [33][34] - The report suggests a potential relaxation of regulatory requirements for interest rate risk indicators, which could facilitate banks' ability to manage long-term local government bonds [7] Summary by Sections ΔEVE Indicator Assessment - As of H1 2025, the ΔEVE/ Tier 1 capital ratio for major banks is as follows: ICBC at -16.66%, CCB at -17.26%, ABC at -14.89%, BOC at -12.28%, PSBC at -9.02%, and BC at -12.46% [15][16] - The report notes a decline in the ΔEVE indicator for these banks compared to 2024, with specific changes of -1.95pct for ICBC and -2.52pct for CCB [4][15] Local Government Bond Undertaking - The report estimates that major banks added 3.25 trillion yuan in local government bonds in H1 2025, with state-owned banks accounting for 1.86 trillion yuan, representing 57.2% of the total [5][32] - The duration of local government bonds is assumed to be distributed across various terms, with 30% of bonds being 10 years and 23% being 30 years [25][29] Debt Capacity Assessment - The current regulatory buffer allows major banks to support the undertaking of 30-year local government bonds up to 666.8 billion yuan, with potential increases if regulatory requirements are relaxed [33][34] - For every 1% relaxation in the ΔEVE/ Tier 1 capital ratio, banks could undertake an additional 593.4 billion yuan of 30-year local government bonds [34][35] Investment Recommendations - The report recommends a bottom-line allocation to large state-owned banks, with specific beneficiaries being ABC and ICBC [39] - Core allocations should focus on leading comprehensive banks, with recommended stocks including CMB and CCB [39] - For flexible allocations, regional banks with unique characteristics, such as JSB and CQB, are highlighted as potential beneficiaries [39][40]