GF SECURITIES·2026-02-24 06:04Core Insights - The report indicates that liquidity is expected to remain stable post-holiday, with a focus on the inflation landscape in the second quarter of 2026 [1]. Group 1: Market Performance - During the observation period from February 9 to February 20, 2026, the banking sector (CITIC first-level industry) experienced an overall decline of 1.3%, ranking 23rd among all industries and underperforming the Wind All A index, which rose by 1.1% [15]. - The performance of state-owned banks, joint-stock banks, city commercial banks, and rural commercial banks showed declines of -1.67%, -1.53%, -0.52%, and -0.81% respectively [15]. - The Hang Seng Composite Index increased by 0.4%, while H-shares of banks fell by 0.2%, underperforming the Hang Seng Composite Index but outperforming A-share banks [15]. Group 2: Individual Stock Performance - Among A-share banks, Huaxia Bank and Nanjing Bank saw increases of 2.28% and 1.43% respectively, while Chongqing Bank and Xi'an Bank faced declines of 4.40% and 3.61% [15]. - In the H-share market, Minsheng Bank led with a 4.80% increase, followed by Zhejiang Commercial Bank at 1.96% and Qingdao Bank at 0.91%. Conversely, Postal Savings Bank, Agricultural Bank, and Chongqing Bank saw declines of 2.68%, 1.64%, and 1.62% respectively [15]. Group 3: Bond Market Performance - The average price of bank convertible bonds rose by 0.48%, underperforming the Zhongzheng convertible bond index by 0.60 percentage points [16]. - The top-performing convertible bonds included Shangyin Convertible Bond (+1.26%), Zhongyin Convertible Bond (+0.51%), and Xingye Convertible Bond (+0.25%), while the worst performers included Ziyin Convertible Bond, which fell by 0.02% [16]. Group 4: Profit Forecasts - There were changes in the performance growth expectations for three banks in 2025, specifically Huaxia Bank, Changshu Bank, and Jiangyin Bank. However, the net profit and revenue growth expectations for A-share banks in 2025 remained unchanged compared to the previous period [16]. Group 5: Investment Recommendations - The report suggests that while banks are unlikely to yield relative returns, their valuations may receive liquidity support, leading to potential absolute returns. The overall banking sector is expected to trend upwards from the post-holiday period until the Two Sessions [17]. - The core issue for the second quarter is whether inflation will accelerate and if long-term interest rates will continue to rise. If inflation accelerates, high-dividend and bond-like asset valuations may be pressured, necessitating a downward adjustment of target returns for the banking sector [17]. - The report maintains that the banking sector may experience further differentiation in 2026, with larger banks and wealth management banks expected to outperform. Recommended core stocks include Ningbo Bank, China Merchants Bank, Qingdao Bank, and large state-owned banks [17].