GUOTAI HAITONG SECURITIES·2026-01-25 07:47Investment Rating - The report assigns an "Overweight" rating to the banking sector [4]. Core Insights - As of January 23, 2026, eight banks have reported stable growth in performance and maintained asset quality. The outlook for 2026 suggests continued improvement in bank performance, supported by narrowing interest margin declines and decreasing credit costs [2][4]. Summary by Sections 1. Performance Indicators - Eight banks reported their performance for 2025, showing stable growth and asset quality. The revenue growth rates for major banks were as follows: - Shanghai Pudong Development Bank: +1.9% - Industrial Bank: +0.2% - China Merchants Bank: +0.01% - CITIC Bank: -0.6% - Regional banks showed varied performance, with Nanjing Bank at +10.5%, Ningbo Bank at +8.0%, Hangzhou Bank at +1.1%, and Suzhou Rural Bank at +0.4% [4][6]. 2. Scale and Growth - Quality regional banks continued to experience strong credit growth. By the end of 2025, asset growth rates were: - Nanjing Bank: 16.6% - Ningbo Bank: 16.1% - Hangzhou Bank: 12.0% - Loan growth rates were: - Nanjing Bank: 13.4% - Ningbo Bank: 17.4% - Hangzhou Bank: 14.3% - Overall deposit growth remained stable, with city commercial banks maintaining a growth rate of over 10% and joint-stock banks at 7%-8% [4][6]. 3. Asset Quality - The non-performing loan (NPL) ratios showed a stable or declining trend across the eight banks, with Shanghai Pudong Development Bank at 1.26%, Suzhou Rural Bank at 0.88%, and CITIC Bank at 1.15%. The provision coverage ratios remained robust, with Hangzhou Bank and China Merchants Bank showing a decline of over 10 percentage points but still at high absolute levels [4][6]. 4. Outlook for 2026 - The report anticipates continued improvement in bank performance in 2026, driven by: - A narrowing decline in interest margins leading to improved net interest income growth. - Increased fee income from insurance and wealth management channels. - Continued resolution of risks in key corporate sectors and stabilization of retail risk exposure [4][6]. 5. Investment Recommendations - The report suggests focusing on three main investment lines for 2026: 1. Identifying banks with potential for performance growth, recommending Ningbo Bank, China Merchants Bank, and Nanjing Bank. 2. Considering banks with convertible bond expectations, recommending Chongqing Bank and Changshu Bank. 3. Continuing dividend strategies, recommending Bank of Communications, Jiangsu Bank, and Chongqing Rural Commercial Bank [4][6].