Orient Securities·2026-02-27 15:31Investment Rating - The report maintains a "Positive" outlook for the banking sector in 2026 [5] Core Insights - The banking sector is expected to return to a fundamental narrative in 2026, supported by policy financial tools and resilient asset expansion. The net interest margin is anticipated to stabilize during the ongoing deposit repricing cycle, while structural risks are expected to receive policy support [3][48] - The report highlights two main investment themes: 1. High-quality mid-sized banks with solid fundamentals, including Nanjing Bank (601009, Buy), Ningbo Bank (002142, Buy), and Chongqing Rural Commercial Bank (601077, Buy) 2. Large state-owned banks with stable fundamentals and good defensive value, including Bank of Communications (601328, Not Rated) and Industrial and Commercial Bank of China (601398, Not Rated) [3][49] Summary by Sections Net Profit Growth - As of Q4 2025, the net profit growth of commercial banks turned positive at +2.3%, with a quarter-on-quarter increase of +2.3 percentage points, continuing the upward trend since Q2 2025. The growth rate for city and rural commercial banks improved significantly, rising by 11.1 percentage points and 11.9 percentage points compared to Q3 2025, respectively [8][9] Asset Growth and Credit Stability - Total asset growth for commercial banks reached 9.01% as of Q4 2025, with a quarter-on-quarter increase of +0.2 percentage points. The credit growth remained stable, with a year-on-year growth rate of 7.3% [12][12] Net Interest Margin Stabilization - The net interest margin for commercial banks remained stable at 1.42% in Q4 2025. The asset yield is under pressure, but there are positive marginal changes observed, with the new loan interest rate's year-on-year decline narrowing significantly [29][29] Asset Quality - The non-performing loan (NPL) ratio for commercial banks was 1.50% as of Q4 2025, with a quarter-on-quarter decrease of 2 basis points. The improvement in asset quality for rural commercial banks is primarily driven by significant NPL write-offs [33][34] Capital Adequacy - The core tier one capital adequacy ratio for commercial banks increased by 4 basis points to 12.60% as of Q4 2025, indicating an improvement in capital replenishment capacity [44][45]