Core Viewpoint - The report from China Merchants Securities indicates that the banking sector is expected to see a reopening of excess return windows as macro liquidity approaches its peak, despite ongoing pressures from insurance non-standard maturities and a mid-term market outlook that remains positive for banks [1][2]. Group 1: Market Performance and Trends - From mid-July to mid-August, market trading volume increased and indices reached new highs, leading to a reduction in bank focus [1]. - As of August 29, 42 A-share banks reported a year-on-year revenue growth of 1.03%, PPOP growth of 1.13%, and net profit growth of 0.77% for the first half of 2025, showing improvements compared to the first quarter [2]. Group 2: Banking Sector Dynamics - The banking sector's profit improvement in Q2 was attributed to a reduction in bond market pressures and a decline in deposit rates, which provided confidence in bank interest margins [3]. - The report highlights that if the asset side of banks does not align with the reduction in deposit costs, the benefits may be negated by continued credit demand pressures [3]. Group 3: Policy and Structural Changes - The need for banks to focus on serving the real economy and high-quality development is emphasized, with a warning against low interest rates leading to misallocation of resources and increased non-performing loans [4]. - Macro policy design is crucial for guiding banks to prioritize genuine credit demand and avoid internal competition, especially during economic downturns [5]. - Positive changes are noted in policy measures aimed at improving the banking sector's asset side pressures, with expectations for a shift towards supporting the real economy and enhancing overall economic well-being [5].