Investment Rating - The industry investment rating is "Positive" as of October 15, 2025 [2][10]. Core Viewpoints - The banking sector has shown resilience with a positive relative return after prior adjustments, supported by the gradual rollout of mid-term dividends and a stable banking fundamental backdrop [3]. - The average price-to-book (PB) ratio for the banking sector is at 0.67x, which is at the 35.1 percentile level since 2015, indicating potential for valuation recovery [3]. - The report anticipates a stabilization in net interest income due to a slowing decline in asset yield and a steady decrease in liability costs, with net interest margins expected to stabilize in Q3 [4]. Summary by Sections Market Performance - The banking index increased by 0.28%, outperforming the CSI 300 index by 0.8 percentage points during the week of October 9-10, 2025 [3]. - Notable stock performances included Qilu Bank, Changsha Bank, and Shanghai Bank, each rising by 2.6% [3]. Financial Fundamentals - Q3 earnings are expected to show slight fluctuations due to adjustments in the bond market, but net profit growth is projected to remain stable [4]. - The report highlights a continued strong performance in net interest income, with expectations for a stable net interest margin in Q3 [4]. - Asset quality is anticipated to remain stable, with provisions not adversely affecting profits [4]. Mid-term Dividends - Several banks, including Shanghai Bank and Zhangjiagang Bank, have announced mid-term dividends, with Shanghai Bank declaring a dividend of 0.3 yuan per share [5]. - The gradual rollout of mid-term dividends is expected to enhance the attractiveness of bank stocks for long-term investors [5]. Funding and Investment Trends - There has been an increase in shareholding by state-owned enterprises and asset management companies, reflecting confidence in the banking sector [5]. - The average dividend yield for listed banks is currently at 4.4%, which has increased by approximately 64 basis points since July [5]. Future Outlook - The report suggests a positive outlook for the banking sector in the next 3-6 months, with expectations for a rebalancing of market styles and a potential recovery in valuations [3][10].