Changjiang Securities·2026-02-23 23:30Investment Rating - The industry investment rating is "Positive" and maintained [11] Core Insights - The banking index fell by 1.3% this week, underperforming the CSI 300 and ChiNext indices by 1.6% and 2.5% respectively, indicating a short-term style switch in the market [6][19] - H-shares of banks led the gains, while most A-shares declined, with notable performances from Huaxia Bank and Shanghai Bank due to improved earnings and strong expectations for convertible bond conversions [6][19] - The price-to-book (PB) ratio and return on equity (ROE) of bank stocks remain undervalued, with a continued recommendation for high-quality city commercial banks in Zhejiang, Jiangsu, and Shandong provinces, including Hangzhou Bank, Ningbo Bank, Jiangsu Bank, Nanjing Bank, Qingdao Bank, Qilu Bank, and Suzhou Bank [6][19] - The report also suggests focusing on low-valuation, high-dividend, and convertible bond opportunities, particularly in Industrial Bank [6][19] Summary by Sections Market Performance - The banking sector's trading activity has decreased, with turnover rates falling, although the transaction volume share for state-owned and rural commercial banks has rebounded [8][39] - The average dividend yield for the six major state-owned banks in A-shares is 4.28%, with a spread of 249 basis points over the 10-year government bond yield, while H-shares yield 5.21% [7][29] Profit Growth and Net Interest Margin - The overall asset growth rate for commercial banks reached 9.0% year-on-year by the end of Q4 2025, with major state-owned banks seeing a growth rate of 10.8% [9][44] - The net profit growth for commercial banks was 2.3% year-on-year, indicating a positive trend, particularly among city and rural commercial banks [9][44] - The net interest margin for 2025 is projected at 1.42%, with a marginal stabilization observed, and a further narrowing of the decline expected in 2026 [9][46] Asset Quality - The non-performing loan (NPL) ratios across various banks are stable or improving, attributed to increased write-off efforts, while the provision coverage ratio continues to decline [10][49] - Capital adequacy ratios remain stable, with attention on the potential impact of the second round of fiscal injections for state-owned banks and refinancing for smaller banks in 2026 [10][49]