Core Viewpoint - The comprehensive financing cost of the real economy continues to decline, leading to a decrease in banks' net interest margins, raising concerns about where to invest in a low-interest-rate environment [1][2][3] Group 1: Deposit Rates and Trends - Since the beginning of the year, deposit rates for large certificates of deposit (CDs) have dropped significantly, with over 40 banks reporting rates below 1% for terms under one year and many three-year rates below 2% [1][6] - The average three-year large CD rate among the six major banks is around 1.55%, down from over 3% three years ago, indicating a substantial decline in long-term deposit yields [1][6] - Smaller banks are also experiencing a convergence in rates, with some three-month products recently issued at rates between 0.93% and 0.95% [1][6] Group 2: Net Interest Margin and Banking Strategy - As of Q3 2025, the net interest margin for commercial banks has narrowed to a historical low of 1.42%, with large banks at 1.31%, reflecting ongoing pressure on profitability [2][7] - The reduction in high-cost liabilities, such as large CDs, is seen as a strategy to stabilize net interest margins amid declining financing costs for the real economy [2][7] Group 3: Future of Deposits and Market Reactions - A significant amount of deposits, estimated at around 50 trillion yuan, will reach maturity in 2026, raising questions about potential "deposit migration" as these funds face re-pricing [3][8] - Despite the low rates, many depositors are expected to keep their funds in the banking system due to their preference for stable returns and low risk, with a high deposit retention rate projected to remain above 90% [3][8] - Financial institutions are encouraged to balance business development with risk management as they navigate the upcoming re-pricing of deposits [4][9]

Group 1 - The report from Zhongyin International maintains an "overweight" rating for the H-share segment of domestic banks, with a specific recommendation for Industrial and Commercial Bank of China (ICBC) due to its relatively attractive valuation among peers [1] - Other banks recommended for purchase include Agricultural Bank of China, China Merchants Bank, China Construction Bank, Postal Savings Bank of China, and China Everbright Bank [1] - It is predicted that over 50 trillion RMB of long-term fixed deposits will mature in 2026, which is expected to create a repricing window for bank liabilities, significantly alleviating the net interest margin pressure that has troubled the industry in recent years [1] Group 2 - The report emphasizes that 2026 will mark the largest liability repricing window in the banking industry’s history, which will not only slow the decline of net interest margins but also create conditions for the recovery of bank profitability [2] - Despite facing margin pressure, the banking sector's fundamentals are expected to remain robust in 2026, with a slight year-on-year increase in net profit attributable to shareholders projected for 2025, and an anticipated growth rate of about 2% in 2026 [2]

Group 1 - The core viewpoint of the report is that the banking sector's H-shares are rated as "overweight," with specific recommendations for banks such as Industrial and Commercial Bank of China (ICBC) due to its attractive valuation compared to peers [1][2] - The report predicts that over 50 trillion RMB of long-term fixed deposits will mature in 2026, creating a re-pricing window for bank liabilities, which is expected to alleviate the downward pressure on net interest margins that has troubled the industry in recent years [1][2] - As of June 2025, the total RMB deposits in mainland China reached 320.17 trillion RMB, with the proportion of one to five-year deposits from the four major state-owned commercial banks decreasing from 24.5% at the end of 2024 to 23.5%, indicating initial signs of improvement in deposit structure [1] Group 2 - The report emphasizes that 2026 will mark the largest liability re-pricing window in the history of the banking industry, which will not only slow the decline in net interest margins but also create conditions for the recovery of bank profitability [2] - Despite facing margin pressure, the report anticipates that the fundamentals of the banking industry will remain robust in 2026, with a slight year-on-year increase in net profit attributable to shareholders for the commercial banks covered by the report in 2025, and an expected growth rate of about 2% in 2026 [2]