Changjiang Securities·2025-12-28 07:31Core Insights - The foundation for the valuation recovery of bank stocks is the establishment of a solid risk bottom line, with bank stocks currently in the process of confirming this bottom line [4][19] - Stable allocation value is leading the valuation recovery, with financial supply-side reforms accelerating in the long term, resulting in increased concentration of market share among state-owned banks and leading city commercial banks [4][7] - The focus for 2026 is on the stabilization of net interest margins and retail risk pressures, with expectations for improved liability costs driving net interest margins to stabilize [8][21] Group 1: Risk Bottom Line and Valuation Recovery - The valuation cycle of bank stocks fluctuates around the operating cycle, characterized by a pressured macro environment and significantly narrowed bank interest margins since 2023 [7][19] - The market anticipates a stabilization of interest margins and overall asset quality by 2026, although retail and real estate sectors remain under pressure [7][19] - The ongoing process of establishing a risk bottom line is crucial for the recovery of bank stock valuations, with state-owned banks expected to play a leading role in the consolidation of financial institutions [7][30] Group 2: Fundamental Focus on Interest Margin Stabilization and Retail Risk - Total loan growth is expected to decline to 5.5% in 2026, with a year-on-year decrease of approximately 1 trillion yuan, primarily due to continued pressure from retail loans [8][40] - The net interest margin is projected to stabilize, with a potential decrease in deposit costs by 20 to 30 basis points as excess savings from three-year fixed deposits mature [8][21] - Asset quality concerns are particularly focused on mortgage and collateralized loans, with the loan-to-value (LTV) ratio of current mortgage loans remaining at controllable levels [8][21] Group 3: Investment Opportunities and Market Dynamics - Bank stocks are still significantly undervalued from a PB-ROE perspective, especially among quality city commercial banks [9][29] - Despite short-term fluctuations in funding, the allocation value of bank stocks remains intact, with insurance capital continuing to increase its holdings in response to asset scarcity [9][21] - Recommended stocks include Hangzhou Bank, Nanjing Bank, and Jiangsu Bank, with a focus on quality city commercial banks and dividend-yielding assets like China Merchants Bank and Bank of Communications [11][9]