Group 1 - UBS Group generally supports most of the recommendations from Swiss regulators [1] - Adjustments to financial metrics will lead to increased capital requirements [1] - Investments in foreign business units will be deducted from Common Equity Tier 1 (CET1) Capital [1] - The company will maintain approximately $24 billion in Pro Forma CET1 Capital [1]

Core Viewpoint - The recent approval for the issuance of A-shares by four major state-owned banks in China aims to raise a total of 520 billion RMB to strengthen their core tier one capital and support future business development [1][4]. Group 1: Specifics of the Share Issuance - The specific objects of the share issuance include the Ministry of Finance, with variations among the banks; for instance, China Bank and Construction Bank are solely issuing to the Ministry, while others include additional entities like China Mobile and China Tobacco [2]. - The distribution of the 520 billion RMB raised is as follows: China Bank up to 165 billion RMB, Construction Bank up to 105 billion RMB, Transportation Bank up to 120 billion RMB, and Postal Savings Bank 130 billion RMB [3]. Group 2: Use of Raised Funds - The funds raised from the issuance will be used entirely to increase core tier one capital after deducting related issuance costs, which will enhance the capital adequacy ratios of the banks [4]. Group 3: Source of Funding - The Ministry of Finance plans to issue special government bonds worth 500 billion RMB to support the capital replenishment of these banks, as part of a proactive strategy rather than a response to financial distress [5][6]. Group 4: Rationale for Premium Issuance - The issuance is conducted at a premium to the market price, reflecting confidence in the banks' future development and the stability of the Chinese economy, while also addressing concerns about asset quality and profitability [8]. Group 5: Protection of Minority Shareholders - The banks acknowledge that the issuance may temporarily dilute earnings per share and net asset value, but they commit to enhancing capital management and profitability to protect the rights of minority shareholders [9].

Core Points - Three banks have received approval from the China Securities Regulatory Commission (CSRC) to issue shares to specific investors, with plans to comply with relevant laws and regulations [4] - The approval is valid for 12 months from the date of registration, and the banks must adhere to the submission documents and issuance plans approved by the Shanghai Stock Exchange [4] - The boards of directors and shareholders of the three banks have approved the issuance of A-shares, which has also been reviewed and approved by the Shanghai Stock Exchange and the CSRC [4] Fundraising Details - China Bank plans to raise up to RMB 165 billion, while Bank of Communications aims for RMB 120 billion, and Postal Savings Bank targets RMB 130 billion [5] - The funds raised will be used entirely to increase core Tier 1 capital after deducting related issuance costs [5] - The capital injection is intended to enhance the banks' ability to support the real economy and implement national policies effectively [5] Financial Performance - As of the end of Q1 2025, the core Tier 1 capital adequacy ratios for the three banks are reported as follows: China Bank at 11.82%, Bank of Communications at 10.25%, and Postal Savings Bank at 9.21% [5]

Investment Rating - The investment rating for Postal Savings Bank is "Outperform the Market" (maintained) [1][5] Core Views - The report indicates that the bank's planned private placement will enhance its capital, thereby improving its ability to serve the real economy and supporting its long-term growth potential [2][4][8] - The private placement involves issuing 20.57 billion A-shares at a price of 6.32 CNY per share, aiming to raise a total of 130 billion CNY, which will be used entirely to supplement core Tier 1 capital [2][3] - Following the completion of the private placement, the bank's core Tier 1 capital adequacy ratio is expected to increase by approximately 1.5 percentage points, from 9.56% to 11.07% [4] Financial Performance Summary - For 2024, the bank's revenue is projected to be 348.8 billion CNY, a year-on-year increase of 1.8%, with a net profit attributable to shareholders of 86.5 billion CNY, reflecting a 0.2% growth [6][11] - The total assets are expected to grow by 8.6% year-on-year to 17.1 trillion CNY by the end of 2024 [6][11] - The bank's non-performing loan ratio is projected to be 0.90% by the end of 2024, indicating a slight increase from the beginning of the year [6][11] Profitability and Valuation Metrics - The report forecasts the bank's net profit for 2025-2027 to be 87 billion CNY, 98.9 billion CNY, and 111.4 billion CNY respectively, with year-on-year growth rates of 1.0%, 1.7%, and 1.7% [2][8] - The fully diluted EPS is expected to be 0.82 CNY, 0.83 CNY, and 0.85 CNY for the years 2025, 2026, and 2027 respectively [2][8] - The current stock price corresponds to a PE ratio of 6.4x, 6.2x, and 6.1x, and a PB ratio of 0.58x, 0.55x, and 0.52x for the same years [2][8]

Core Viewpoint - Four major state-owned banks in China announced plans to raise capital through A-share issuance to supplement their core tier one capital, with total fundraising amounts reaching up to RMB 4,200 billion [1][2]. Group 1: Capital Raising Announcements - The four banks involved are China Construction Bank (CCB), Bank of China (BOC), Bank of Communications (BoCom), and Postal Savings Bank of China (PSBC), with respective fundraising targets of RMB 1,050 billion, 1,650 billion, 1,200 billion, and 1,300 billion [1][2]. - The issuance of special government bonds to support these capital increases is imminent, as indicated by the Ministry of Finance [1][2]. Group 2: Government Support and Policy - The government plans to issue RMB 5,000 billion in special bonds to support the capital replenishment of large state-owned commercial banks, as outlined in the government work report [2]. - The approach to increasing core tier one capital was first mentioned on September 24, 2024, as part of a broader set of incremental policies [2]. Group 3: Capital Adequacy Ratios - As of the end of 2024, the core tier one capital adequacy ratios of five major state-owned banks showed varying degrees of improvement compared to mid-2024, with CCB achieving the highest increase of 0.47 percentage points, reaching 14.48% [3][4]. - The capital adequacy ratios for the six major banks are as follows: ICBC at 14.10%, ABC at 11.42%, BOC at 12.20%, CCB at 14.48%, BoCom at 10.24%, and PSBC at 9.28%, all exceeding the regulatory minimum requirements [4]. Group 4: Profit Growth and Loan Issuance - All six major state-owned banks reported positive net profit growth in 2024, with ABC showing the largest increase of 4.76%, reaching RMB 2,826.71 billion [4][5]. - The total new loans issued by the six major banks in 2024 amounted to approximately RMB 9.61 trillion, accounting for about 53.12% of the total industry loans [5]. Group 5: Future Outlook and Economic Support - The primary goal of increasing core tier one capital is to enhance the banks' ability to support the real economy, as the growth of risk-weighted assets is expected to outpace internal capital growth [6]. - The Ministry of Finance emphasized that bolstering the core tier one capital of state-owned banks will not only improve their operational stability but also enhance their credit issuance capacity, thereby supporting macroeconomic recovery and boosting market confidence [6].

Investment Rating - The report maintains an "Overweight" rating for the securities and banking sectors, indicating a positive outlook for these industries [10]. Core Insights - The financing scale has reached a new high, with the balance of financing exceeding 1.9 trillion yuan, the highest since July 2015, suggesting strong market activity and potential investment opportunities in quality financial stocks [1][13]. - The report highlights that the investment opportunities are prioritized as follows: securities > insurance > banking, with a focus on structural opportunities within the sectors [1][13]. - The upcoming Two Sessions (March 4-5) are expected to set the economic development tone and macro policy direction, which could impact market sentiment [1][34]. Summary by Sections Securities - The report emphasizes that the merger theme remains a significant driver for the sector's performance, with active trading conditions reflected in a daily transaction volume of around 2 trillion yuan [2][14]. - Recommended top-tier brokers include China Galaxy and CITIC Securities, which are expected to benefit from ongoing market dynamics [3][14]. Insurance - The insurance sector is advised to focus on asset-liability matching as the primary operational goal, especially in light of the recent fluctuations in the 10-year government bond yield, which remained close to 1.8% [2][25]. - The report suggests investing in leading insurance companies such as AIA, Ping An, China Pacific Insurance, and China Life Insurance, as they are expected to recover in valuation [3][25]. Banking - The People's Bank of China is actively promoting the issuance of special government bonds to support large state-owned banks in replenishing their core tier one capital, which is anticipated to enhance their risk resilience and credit issuance capacity [2][28]. - The report identifies quality dividend-paying stocks such as China Merchants Bank, Chengdu Bank, Suzhou Bank, Shanghai Bank, and Chongqing Rural Commercial Bank as attractive investment options [3][29]. - The banking sector's price-to-book (PB) ratio is currently at 0.66, indicating a relatively low valuation compared to historical levels, which may present a buying opportunity [28].