Investment Rating - The industry investment rating is "Market Weight" indicating that the industry index is expected to perform within -10% to 10% relative to the CSI 300 index over the next six months [6]. Core Insights - The report highlights a strong growth in non-interest income for Changshu Bank, with an increase in cash dividend ratios [4]. - The report notes that government financing continues to support social financing, with M1 growth improving [4]. - The report emphasizes that credit demand has weakened in July due to seasonal factors and the cleaning of overdue accounts, leading to a significant reduction in loans [4]. - The report suggests that future credit will focus more on optimizing structure while maintaining total volume, with a shift towards consumer and operational loans [4]. - The report indicates that monetary supply continues to improve, with an increase in deposits [5]. - The report mentions that the pressure on interest margins is easing, with new loan rates remaining stable despite recent cuts in benchmark rates [5]. - The investment recommendation is to focus on stable dividends and recovery potential, particularly in state-owned banks and leading small and medium-sized banks [5]. Summary by Sections Industry Overview - The report discusses the July financial data released by the People's Bank of China, showing a year-on-year growth of 9.0% in social financing scale [4]. - It notes that the weighted average interest rate for new corporate loans was approximately 3.2% in July, down from 3.3% in the first half of the year [4]. Credit Market Analysis - The report highlights a seasonal decline in credit, with a reduction of 426.3 billion yuan in July loans, which is a significant drop compared to the previous year [4]. - It mentions that the government has accelerated bond issuance, contributing to a faster growth rate in social financing [4]. Monetary Supply and Deposits - The report states that M2 and M1 grew by 8.8% and 5.6% year-on-year, respectively, indicating improved monetary supply conditions [5]. - It emphasizes that the activation of deposits is driven by several factors, including changes in exchange rate expectations and improved cash flow for small and medium enterprises [5]. Interest Margin Outlook - The report indicates that the downward pressure on interest margins is expected to be less significant in 2025 compared to 2024, with stable loan rates despite recent cuts [5]. - It suggests that if monetary policy is further loosened, interest margin pressures may increase, leading to adjustments in deposit rates [5]. Investment Recommendations - The report advises focusing on banks with stable dividends and recovery potential, particularly state-owned banks and leading small and medium-sized banks, as government financing remains a strong driver for bank growth [5].

Group 1: Loan Data - In July, new RMB loans decreased by 50 billion, a year-on-year reduction of 310 billion, lower than the Wind average expectation[12] - From January to July, RMB loans decreased by 660 billion year-on-year, with a growth rate decline of 1.6 percentage points compared to last year[12] - The structure of loans deteriorated, with household loans down by 492.7 billion, a year-on-year decrease of 287.1 billion[13] Group 2: Deposit Data - In July, RMB deposits increased by 500 billion, a year-on-year increase of 1.3 trillion[16] - Household deposits decreased by 780 billion year-on-year, while corporate deposits increased by 320.9 billion[16] - From January to July, RMB deposits increased by 7.78 trillion year-on-year, with corporate deposits contributing 45.5%[16] Group 3: Social Financing (社融) - In July, new social financing reached 1.2 trillion, with a growth rate of 9%, up by 0.1 percentage points from the previous month[18] - Government bonds contributed significantly, with net financing of approximately 812.4 billion for local bonds, a year-on-year increase[19] - The overall social financing growth is expected to decline, with government bond growth peaking and then decreasing[18] Group 4: Market Insights - The equity market has exerted emotional pressure on the bond market, leading to a "stock-bond seesaw" effect[3] - The current financial data supports a bullish outlook on the bond market, with a 1.7% yield on ten-year bonds seen as an entry point[5] - The weakening demand for financing in the real economy suggests limited upward pressure on interest rates in the near future[5]

Core Viewpoint - The financial industry in China is experiencing a significant shift towards "anti-involution," with regulatory measures being implemented to address issues of price distortion and non-market behavior in the bond issuance process [1][3]. Group 1: Regulatory Measures - The China Interbank Market Dealers Association issued a notice requiring lead underwriters to refrain from quoting underwriting fees below cost when participating in bond project bidding [1]. - The notice aims to tackle problems such as pricing distortions and artificial interference in the book-building process, mandating lead underwriters to establish internal management systems for fee quotations [1]. Group 2: Industry Self-Regulation - A self-regulatory investigation was initiated against six lead underwriters involved in a bond project for Guangfa Bank, triggered by extremely low underwriting service fees, with some institutions quoting as low as 700 yuan [2]. - The investigation revealed that Guangfa Bank may have influenced pricing, prompting further verification by the association [2]. Group 3: Institutional Responses - Major financial institutions, including Industrial and Commercial Bank of China and Guangfa Bank, have made "anti-involution" a key focus in their operational strategies, emphasizing the need to resist cutthroat competition and adhere to long-term business principles [3]. - Local regulatory bodies across various provinces have also taken steps to combat "involution," including issuing negative lists for unfair competition and developing self-regulatory agreements [3]. Group 4: Expert Analysis - Experts note that the "involution" in the financial sector is primarily driven by price competition and performance assessment pressures, creating a complex interwoven situation [4]. - Recommendations for addressing "involution" include collaborative efforts from regulators, banks, and self-regulatory organizations to establish clearer pricing standards and improve service differentiation through innovation [4].

Core Viewpoint - The recent notice from the China Interbank Market Dealers Association aims to regulate the bond underwriting market by addressing issues such as distorted pricing, non-market-based issuance, and interference in the underwriting process, emphasizing that underwriting fees must not be quoted below cost [1][4][5]. Group 1: Regulatory Measures - The notice reiterates that underwriters must not quote fees below cost, requiring main underwriters to establish internal management systems for pricing and to assess project costs comprehensively [5][6]. - This is the second notice issued within a month regarding low underwriting fees, indicating a growing concern over practices such as low-price underwriting and potential collusion among market participants [6][7]. - The association has initiated self-regulatory investigations into firms that engaged in low-cost bidding, highlighting the need for stricter compliance and accountability [6][9]. Group 2: Pricing Mechanism and Underwriter Selection - The notice mandates that issuers and main underwriters adhere to market principles when determining pricing ranges, ensuring that these ranges reflect comparable bond rates or fair market prices [8]. - It limits the number of underwriters based on the issuance scale, allowing a maximum of two underwriters for short-term and ultra-short-term notes, three for issues between 2 billion and 5 billion, and four for issues above 5 billion [8]. - The notice also emphasizes the importance of maintaining a balance between underwriting and investor participation, ensuring that underwriting does not crowd out legitimate market demand [8]. Group 3: Complaint and Integrity Mechanism - The association plans to establish a complaint and integrity public disclosure mechanism to address violations of laws and self-regulatory rules during the issuance process [9]. - Complaints regarding interference in pricing, low-cost bidding, and other unethical practices will be documented and made public, promoting transparency and accountability in the bond market [9].

Group 1 - The recent focus on financial "anti-involution" is aimed at addressing the disorderly competition within the financial industry to improve service quality [1] - Experts emphasize the need for a balance between supporting economic growth and preventing risks, advocating for rational competition and stability in the financial system [1] - From a macro perspective, policies should enhance support for the real economy while maintaining the stability of banking operations [1] Group 2 - Future monetary policy should adopt a more refined balance strategy between "stabilizing growth" and "preventing risks," avoiding excessive easing that could lead to long-term risks [2] - The central bank plans to strengthen the execution and supervision of interest rate policies to maintain healthy competition in the deposit and loan markets [2] - Measures may include enhancing self-discipline mechanisms for interest rate pricing and improving the assessment systems for financial institutions [2] Group 3 - The central bank aims to continue supporting local government financing platforms and manage risks in key areas [3] - A macro-prudential management framework will be improved to monitor risks in local government debt, small financial institutions, and real estate credit [3] - Different policies and tools will be employed to address risks in three key areas, including extending financial support for debt restructuring [3]

Core Viewpoint - The financial industry is experiencing a wave of "anti-involution," prompting reflection on unhealthy competition practices that undermine market integrity [2][3]. Group 1: Industry Challenges - Regions like Guangdong and Ningxia are promoting "anti-involution" through self-regulatory agreements, addressing issues of excessive competition [2]. - Banks have engaged in practices such as high-interest deposits and substantial rebates on mortgages to capture market share, often at the expense of profitability [2]. - The insurance sector has faced prolonged "involution," with companies focusing solely on yield, leading to chaotic commission competition and risks [2]. - Brokerage firms are also involved in price wars, with bond underwriting fees dropping to as low as 700 yuan, prompting regulatory investigations [2][3]. Group 2: Consequences of Malpractice - The prevalence of low-price competition is damaging the financial ecosystem, leading to a decline in service quality and increased systemic risk [2][3]. - The "prisoner's dilemma" in the industry results in a scenario where compliance-oriented firms struggle to compete against low-cost disruptors, potentially leading to a loss of innovation and market differentiation [3]. Group 3: Regulatory and Institutional Responses - There is a need for regulatory intervention to shift the focus from zero-sum competition to collaborative growth, emphasizing the importance of value over price [3]. - Strengthening regulations against "low-price dumping" and "false advertising" is essential, alongside improving service standards and information disclosure [3]. - Financial institutions should refocus their competitive strategies from price wars to value-based competition, enhancing service quality and consumer trust [4]. Group 4: Future Directions - The industry must embrace a "quality over price" philosophy, where consumers are willing to pay for professional services, allowing financial institutions to escape the cycle of involution [4]. - The essence of financial services lies in risk identification, resource allocation, and wealth management, which should not be compromised by low-price strategies [3][4].

Core Viewpoint - The financial industry is experiencing a wave of "anti-involution," prompting reflection on unhealthy competition practices that undermine market integrity [2][3]. Group 1: Industry Practices - Regions like Guangdong and Ningxia are promoting "anti-involution" through self-regulatory agreements to address malicious competition in the financial sector [2]. - Banks have engaged in practices such as high-interest deposits and excessive rebates on loans to capture market share, often at the expense of profitability [2]. - The insurance sector has faced prolonged "involution," with companies focusing solely on yield, leading to chaotic commission competition and increased risk [2]. - Brokerage firms are also involved in price wars, with bond underwriting fees dropping to as low as 700 yuan, prompting regulatory investigations into these practices [2][3]. Group 2: Consequences of Malicious Competition - The prevalence of low-price strategies and rebates is damaging the health of the financial ecosystem, necessitating a rejection of "poor quality low prices" [2][3]. - Short-term gains from such practices may lead to market share increases, but they ultimately deplete industry profits and degrade service quality, risking long-term sustainability [2][3]. - The "prisoner's dilemma" in the industry results in a distorted ecosystem where compliant firms struggle to compete against low-cost disruptors, leading to a loss of innovation and a homogenized market [3]. Group 3: Regulatory and Institutional Responses - Regulatory intervention is essential to shift the focus from zero-sum competition to cooperative strategies, reinforcing the need to reject low-quality pricing [3]. - Institutions should refocus their competitive strategies from price wars to value-based competition, emphasizing service quality and professional capabilities [4]. - Financial services should prioritize risk identification, resource allocation, and wealth management expertise, which should not be undermined by low-price tactics [3][4]. - A shift towards "quality over price" is necessary for the financial industry to escape the cycle of involution and foster a sustainable environment that benefits consumers [4].

Core Viewpoint - The financial industry is experiencing a wave of "anti-involution," prompting reflection on unhealthy competition practices that undermine market integrity [2][3]. Group 1: Industry Practices - Regions like Guangdong and Ningxia are promoting "anti-involution" through self-regulatory agreements to address malicious competition in the financial sector [2]. - Banks have engaged in practices such as high-interest deposits and excessive rebates on loans to capture market share, often at the expense of profitability [2]. - The insurance sector has faced intense competition focused solely on yield, leading to chaotic commission structures and risks associated with fee discrepancies [2]. - Brokerage firms are also involved in price wars, with bond underwriting fees dropping to as low as 700 yuan, prompting regulatory investigations into these practices [2][3]. Group 2: Consequences of Malicious Competition - The prevalence of low-price strategies and rebates is damaging the health of the financial ecosystem, necessitating a rejection of "poor quality low prices" [2][3]. - Short-term gains from such practices may lead to market share increases but ultimately deplete industry profits and degrade service quality, risking long-term sustainability [2][3]. - The "prisoner's dilemma" in the industry results in a scenario where compliance-oriented institutions struggle to compete with low-cost disruptors, leading to a loss of focus on value [3]. Group 3: Regulatory and Institutional Responses - There is a need for regulatory intervention to shift the focus from zero-sum competition to cooperative strategies, enhancing the industry's innovation and quality [3]. - Strengthening regulations against "low-price dumping" and "false advertising" is essential, alongside establishing clear service standards and improving information disclosure [3]. - Financial institutions should refocus their competitive strategies from price wars to value-based competition, emphasizing quality service and professional capabilities [4]. Group 4: Future Directions - The industry must embrace a "quality over price" philosophy, where consumers are willing to pay for professional services, allowing financial institutions to escape the cycle of involution [4]. - The essence of financial services lies in risk identification, resource allocation, and wealth management, which should not be compromised by low-price strategies [3][4]. - Upholding the principle of rejecting poor quality low prices is crucial for maintaining the industry's integrity and protecting consumers' long-term interests [4].