Shenwan Hongyuan Securities·2025-12-31 14:14Investment Rating - The report indicates a positive outlook for the banking industry, suggesting a return to a price-to-book (PB) ratio of 1x during the "15th Five-Year Plan" period, focusing on stable profitability and high-quality development [3][4]. Core Insights - The banking sector is transitioning from a focus on scale to quality, with an emphasis on risk management and structural optimization. The "15th Five-Year Plan" includes the goal of building a strong financial nation, highlighting the importance of high-quality development [3][16]. - The report identifies key changes in the banking industry during the "14th Five-Year Plan," including a shift in credit structure, a focus on profitability, and the need for banks to balance risk and efficiency [2][4]. - Regulatory support is expected to stabilize net interest margins, which have reached record lows, with a projected recovery in the coming years [5][19]. Summary by Sections 1. From Quantity to Quality - The banking industry has evolved through three five-year plans, with a shift from rapid expansion to a focus on quality and risk management. The current phase emphasizes high-quality development and financial support for key sectors [2][10]. 2. Developments During the "14th Five-Year Plan" 2.1 ROE: Resilience of State-Owned Banks and Advantages of City Commercial Banks - The return on equity (ROE) for listed banks has remained around 10%, with city commercial banks showing a slight advantage due to higher leverage and better provisioning [19][20]. 2.2 Credit: Moving Away from Scale to Balance Capital and Efficiency - Banks are prioritizing structural transformation over sheer volume, focusing on supporting key sectors and optimizing credit distribution [4][12]. 2.3 Interest Margin: Recovery from Continuous Decline - The report anticipates a stabilization of net interest margins, which have been under pressure, with regulatory measures aimed at supporting banks [5][19]. 2.4 Risk: Provisioning to Support Stability - The banking sector is expected to manage risks more effectively, with a focus on maintaining adequate provisions to support profitability during challenging economic conditions [4][19]. 2.5 Financial Markets: An Alternative Revenue Stream - The report highlights the increasing importance of financial market activities as a means to smooth revenue amid declining interest income, with banks diversifying their investment strategies [4][19]. 3. Investment Analysis Opinion - The report suggests a dual strategy of focusing on leading banks and undervalued city commercial banks, anticipating a recovery in valuations for state-owned banks that have been lagging [3][4].