HUAXI Securities·2026-01-06 07:50Group 1 - The banking sector is expected to see a stabilization in net interest margins in 2026, driven by a peak in deposit re-pricing and a favorable loan rate environment [6][70][75] - The overall banking index increased by 7% in 2025, with H-shares and state-owned banks leading the gains, although the banking index underperformed the Shanghai Composite Index by 11 percentage points [3][10][12] - Insurance capital has significantly increased its allocation to bank stocks, with a net increase of approximately 570 billion yuan in 2025, indicating strong future demand for bank equities [4][23][26] Group 2 - The growth of interest-earning assets is a key stabilizer for bank performance, contributing to an 8%-11% increase in earnings, while the negative impact of interest margins has been narrowing [5][45] - The profitability of banks is improving, with a notable recovery in fee income and investment returns, which have become significant growth drivers [41][45] - The performance of city commercial banks and state-owned banks has been particularly strong, with city commercial banks showing the highest profit growth due to reduced credit impairment provisions [48][49] Group 3 - The report highlights a favorable outlook for bank stock investments, focusing on high dividend yields and growth potential, with specific banks like Shanghai Pudong Development Bank and China Merchants Bank identified as beneficiaries [7] - Regulatory policies are evolving to enhance risk management and promote digital finance, which is expected to support the banking sector's stability and growth [51][54] - The macroeconomic environment is characterized by a weak recovery, with credit growth expected to slow down, impacting overall banking performance [6][63]