China Post Securities·2026-01-06 08:23Core Insights - The report maintains a strong market rating for the banking sector, highlighting structural opportunities amid a new economic starting point in 2026 [3][5] - The macroeconomic environment is expected to support credit growth, with fiscal policies becoming more proactive and monetary policies remaining moderately accommodative [3][4] - The banking sector is anticipated to experience a stabilization in net interest margins, with a narrowing space of less than 5 basis points expected in 2026 [4][40] Macroeconomic Fundamentals - The GDP growth target for 2026 is projected to remain stable at around 5%, supported by structural improvements in financing demand from enterprises and households [12][14] - The fiscal deficit rate is expected to increase from 4% in 2025, with proactive fiscal policies aimed at stabilizing growth and expectations [14][16] - Monetary policy will continue to be moderately accommodative, with social financing growth expected to maintain above 8% [16][17] Industry Core Policy Guidance - Regulatory bodies are focusing on protecting net interest margins, with measures in place to guide banks in pricing management and alleviate margin pressures [25][26] - New supportive policies, including interest subsidies for personal consumption loans, are expected to create favorable asset deployment scenarios for banks [27][28] - Capital supplementation policies are being optimized to enhance banks' credit expansion capabilities and risk resilience [28][29] 2026 Profitability Outlook - Corporate loan growth is expected to be a key driver of credit expansion, while retail credit improvements will depend on policy support for income and consumption [4][34] - The net interest margin is projected to stabilize, with a potential bottoming out in 2026, supported by regulatory measures and market conditions [40][41] - Fee income is anticipated to recover, particularly for city commercial banks, as market sentiment improves [42][43] 2026 Asset Quality Outlook - The overall asset quality of the banking sector is expected to stabilize, with non-performing loan ratios remaining low for corporate lines, while retail lines may still face risks [4][20] - The trend of provisioning coverage is expected to improve, providing banks with more flexibility in managing their asset quality [20][21] 2026 Industry Landscape Outlook - Differentiation among banks is likely to become a dominant theme, with larger banks expected to see more stable revenue growth compared to smaller banks facing complex operating environments [4][5] - Regional economic vitality will significantly influence the performance of local banks, with areas of strong economic growth presenting better investment opportunities [5][6] Investment Recommendations - The insurance sector is projected to see over 2 trillion yuan in new market funds in 2026, increasing demand for high-dividend assets [5] - Focus on state-owned banks with stable operations, such as Industrial and Commercial Bank of China and China Construction Bank, as attractive investment targets [5] - Attention should be given to regional banks in economically vibrant areas, such as Jiangsu Bank and Chongqing Bank, which are expected to perform well [5][6]