Group 1: Bank Liability Pressure - Since the second half of 2024, listed banks have shown stable asset expansion, primarily driven by a recovery in deposit growth, with a notable increase in bond and interbank financing[2][14]. - The structure of deposits has shifted, with personal deposits growing faster than corporate deposits, leading to an increase in the proportion of personal deposits in listed banks[2][20]. - Large banks face relatively greater pressure on their deposit growth compared to smaller banks, as their deposit structure is more balanced but has been significantly impacted by the cessation of manual interest supplementation in April 2024[2][26]. Group 2: Financial Investment Trends - The importance of financial investments has increased, with banks actively increasing their financial investments in response to rising interest rate spreads[3][34]. - Different types of banks exhibit varying preferences for trading and investment accounts, with rural commercial banks showing a higher trading attribute compared to state-owned banks[3][40]. - The contribution of financial investment to income has shown volatility, with a negative correlation observed between the 10-year government bond yield and the income contribution from financial investment trading[3][51]. Group 3: Net Interest Margin Dynamics - The net interest margin (NIM) is primarily influenced by the yield on interest-earning assets and the cost of interest-bearing liabilities, with the latter being more rigid[4][59]. - Recent trends indicate that the decline in loan yields and the rise in deposit costs have been the main factors compressing NIM in recent years[4][73]. - The central bank's monetary easing can temporarily boost NIM by lowering interbank financing costs and improving asset yields through enhanced investment and consumption willingness[4][74].

Core Viewpoint - The issuance of interbank certificates of deposit (CDs) remained stable in June despite a peak maturity volume of 4.2 trillion yuan, indicating a shift in the market dynamics compared to earlier months when banks faced liquidity pressures and higher issuance rates [1][4]. Group 1: Market Conditions - In March, the average issuance rate of interbank CDs exceeded 2.0%, reflecting significant liquidity pressure on banks [1][2]. - By June, the issuance rate stabilized at 1.6557%, showing no significant upward pressure on rates despite high maturity volumes [4][8]. - The People's Bank of China (PBOC) provided timely liquidity support, which helped maintain stable issuance prices and allowed banks to navigate the high maturity period safely [4][8]. Group 2: Bank Issuance Capacity - Many banks, including state-owned and city commercial banks, are approaching their annual issuance limits, with some banks like Jiangsu Bank reaching a usage rate of 90.43% [5][6]. - The overall demand for increasing issuance limits in the second half of the year may be limited, as banks currently have sufficient capacity to meet their funding needs [1][5][8]. Group 3: Differentiation Among Banks - There is a notable disparity in the usage rates of interbank CDs among different banks, with some banks like China Merchants Bank showing a low usage rate of only 3.73%, indicating less pressure on their liabilities [6][7]. - State-owned banks generally exhibit higher usage rates compared to the same period last year, suggesting a greater need for liability support [7][8]. - Analysts predict that the net financing growth of state-owned banks may accelerate, while the overall pressure on the liability side is expected to remain neutral [7][8].

Report Industry Investment Rating - There is no information provided regarding the report industry investment rating. Core View of the Report - The discussion on bank liability pressure should clarify the concept, which depends on the scale of the liability gap and the difficulty of filling it, and the liability gap can be measured by regulatory indicators and banks' own demands [1][8]. - The regulatory - indicator - based liability gap is rigid but easy to fill due to the central bank's ample liquidity supply, while the gap based on banks' own demands is flexible but difficult to fill, mainly referring to the demand for deposits [1][8][9]. - Banks' attempts to increase deposit rates to attract deposits due to scale - related concerns lead to an involution - style competition, which reduces the industry's profitability and affects the sustainability of financial support for the real economy and the space for monetary policy [2][11]. - Although the monetary authorities have achieved good results in regulating the deposit and loan market competition order, the involution - style competition caused by scale concerns may resurface, and the root solution lies in abandoning the one - sided pursuit of scale, perhaps by having the board of directors reduce scale - based assessments [3][13]. Summary by Relevant Directory 1. By Bank Liability Pressure - Many investors think that after the new round of deposit rate cuts on May 20, a large amount of deposits flowed to wealth management products, increasing banks' liability pressure [1][8]. - The liability pressure depends on the scale of the liability gap and the difficulty of filling it, and there are two measurement scales: regulatory indicators and banks' own demands [1][8]. - The regulatory - indicator - based liability gap is easy to fill as the central bank has provided ample liquidity, such as a 1 - trillion - yuan reserve requirement ratio cut on May 15, about 0.5 billion yuan of medium - term funds through MLF in May and June, and 1.4 trillion yuan of outright reverse repurchase operations on June 6 and 16 [8]. - The yields of 1Y AAA - grade CDs and 5Y AAA - grade commercial bank financial bonds are at relatively low levels since early May, indicating low demand for funds and easy access to liquidity at low cost for commercial banks [8]. - The gap based on banks' own demands is mainly the demand for deposits, which is difficult to fill as the total deposit scale is relatively fixed [9]. - Banks usually raise deposit rates explicitly or implicitly, but this leads to a zero - sum game, and if other banks follow suit, it may cause a phased increase in deposit rates [2][9][11]. - Banks' desire to increase deposit rates is due to scale concerns, such as not meeting the deposit growth target after the May rate cut, worrying about ranking decline, or wanting to improve their ranking [2][11]. - This involution - style competition also affects the asset side, resulting in an unreasonable decline in loan rates, and overall, it reduces the industry's net interest margin and profit growth [2][11]. - The monetary authorities have regulated the market competition order, but the involution - style competition may resurface, and the root solution is to abandon the one - sided pursuit of scale [3][13].

Core Viewpoint - The article discusses the pressure on banks' liabilities following a recent interest rate cut, emphasizing the challenges banks face in attracting deposits and the implications for their profitability and support for the real economy [3][4][5]. Group 1: Liability Pressure Concept - The concept of liability pressure is defined by both the scale of the liability gap and the difficulty of filling that gap [3]. - There are two measures for assessing the liability gap: one relative to regulatory indicators, which is rigid, and another relative to the bank's own needs, which is more flexible [4]. Group 2: Deposit Demand and Competition - In a market with ample liquidity, banks face a fixed total scale of deposits, making it more challenging to attract deposits compared to obtaining liquidity from the central bank [4]. - Banks often raise deposit rates to attract more deposits, but this can lead to a competitive cycle where banks follow each other's rate increases, resulting in a temporary rise in deposit rates [4][5]. Group 3: Scale Obsession and Its Consequences - Some banks may feel the need to increase deposit rates due to slower deposit growth following the interest rate cut, concerns about their ranking, or a desire to improve their position [5]. - This scale obsession leads to a competitive environment that can lower banks' net interest margins and profit growth, ultimately affecting their ability to support the real economy sustainably [6]. Group 4: Regulatory Environment and Future Risks - The article notes that while regulatory measures have improved market competition, the tendency for banks to engage in competitive behaviors that undermine these regulations can resurface [6]. - Examples include banks circumventing interest rate caps through manual interest compensation or non-bank deposit channels, indicating a need for a cultural shift away from scale obsession within banks [6].

1. Report Industry Investment Rating There is no information provided regarding the report industry investment rating in the given content. 2. Core View of the Report Since the beginning of this year, the market has been concerned about banks' liability pressure and its impact on the bond market. In Q1, there was a loss of non - bank deposits and tight liquidity, and the significant adjustment in the bond market made banks want to sell some bonds in AC and OCI accounts to realize profits. In Q2, there have been new changes in banks' liability pressure and institutional behavior, along with changes in the central bank's liquidity injection attitude, asset expansion speed after the peak of government bond issuance, the attitude towards realizing floating profits at the end of the quarter, and the liability structure after the deposit rate cut. The report mainly discusses the impact of these changes on banks' bond allocation [2][5][11]. 3. Summary According to Related Catalogs 3.1. Season - end Banks' Asset - Liability Pressure is Controllable - **Asset Side**: In June, the incremental pressure of credit and government bonds is weaker than that in Q1. Historically, the bank's credit delivery rhythm is relatively front - loaded. Although June is a relatively large credit month within the quarter, its increment is generally less than that in January and March of the same year and shows a decreasing trend. As of the end of May, the cumulative net financing scale of special refinancing bonds this year has reached 1.56 trillion yuan, and the supply peak has passed [12]. - **Liability Side**: After the reduction of the deposit listing rate, there is a certain pressure of deposit "relocation", but the rhythm is expected to be smooth. The adjustment of manual interest compensation and the optimization of non - bank inter - bank deposit interest rates are mainly rectifications of unreasonable points and "blockages" in the interest rate transmission process, with a faster implementation progress and a more one - time impact on the pricing of short - term bond varieties such as inter - bank certificates of deposit. The reduction of the deposit listing rate is a normal market - oriented interest rate transmission process. Considering the fixed - term part of deposits and residents' asset allocation stickiness, the rhythm of deposit "relocation" and its impact on inter - bank certificates of deposit will be relatively slow [7][14]. 3.2. Asset - Liability Pressure is Moderate, and the Upper Limit of Inter - bank Certificate of Deposit Rate is Expected to be 1.7% - **Current Situation**: Since mid - to - late May, the yield to maturity of inter - bank certificates of deposit has gradually increased. The increase in the inter - bank certificate of deposit rate is due to the large maturity volume in June and the market's concern about the increased liability pressure of banks after the reduction of the listing rate. However, currently, the central bank's liquidity injection still shows a caring attitude, so the subsequent pressure on the inter - bank certificate of deposit rate may mainly focus on the issuance rhythm in June [7][32]. - **June Maturity and Issuance Rhythm**: The maturity volume of inter - bank certificates of deposit in June is about 4.2 trillion yuan, a historical peak, resulting from the superposition of 3M, 6M, and 1Y maturity pressures. It is expected that the issuance rhythm in June will be relatively front - loaded. The maturity volumes in the upper, middle, and lower ten - day periods of June are 0.92 trillion, 1.95 trillion, and 1.30 trillion yuan respectively. Banks will arrange their liability positions more proactively at the end of the quarter [39][43]. - **Interest Rate Outlook**: The capital market is expected to remain loose in June, and the central bank's liquidity injection shows a caring attitude. Although the inter - bank certificate of deposit may still face short - term upward pressure on yield, the upward space is limited, and the upper limit is expected to be around 1.7% [7][46]. 3.3. Banks' Operation of Realizing Floating Profits in Q2 is Expected to be More Stable - **Stronger Demand for Realizing Floating Profits during Bond Market Corrections**: When the bond market shows a continuous correction between quarters, banks have a stronger motivation to sell old bonds to realize floating profits. Since 2020, banks' net interest margins have continued to narrow, and the growth of handling fee income has also been under pressure. Banks pay more attention to the revenue contribution of the self - operated investment line. When the proportion of fair - value change gains and losses in revenue decreases significantly, the contribution of investment income to revenue generally increases or remains at a high level [50][51]. - **Relatively Low Demand for Selling Bonds in Q2**: From a long - term investment perspective, selling bonds means selling assets with a higher yield to maturity, which will lead to reinvestment pressure. In terms of the bond market trend, in April 2025, the 10 - year Treasury bond yield declined rapidly and then entered a narrow - range oscillation. The market trend change in early April provided a window for banks to realize profits, and the adjustment in May and June was weaker than that in Q1, so the pressure on banks' trading desks was relatively limited. Banks can also adjust the structure of self - operated investments to smooth the impact of bond market fluctuations on profits, such as reducing the proportion of TPL accounts [55][56].

Core Viewpoint - The liquidity gap in March is expected to narrow significantly compared to February, indicating a potential marginal improvement in the funding environment, contingent on the central bank's stance and policy direction during the Two Sessions [1][4]. Group 1: March Liquidity Gap Observations - The overall net financing from government bonds in March is projected to be approximately 1,100 billion [2]. - The expected fiscal revenue and expenditure gap for March is around -1,200 billion [2]. - Excluding MLF and reverse repos, the liquidity gap is anticipated to decrease significantly from February, suggesting a potential marginal improvement in the funding situation [2][4]. Group 2: Bank Liability Pressure - There is considerable pressure on banks' liabilities, particularly due to the outflow of long-term funds, which cannot be fully resolved through market behavior alone and requires regulatory support [3]. - The cautious approach of the central bank in monetary policy may lead to a release of easing signals if the Two Sessions effectively boost market confidence and alleviate the rapid decline in long-term bond rates [3]. - Conversely, if the economic recovery does not show significant pressure, the central bank's focus may remain on stabilizing the exchange rate and preventing risks [3]. Group 3: Future Outlook - The liquidity situation in March will largely depend on the central bank's attitude, especially considering that fiscal expenditures typically occur at the end of the month and the ongoing pressure on bank liabilities [4]. - Continuous observation and tracking of the policy direction from the Two Sessions and the central bank's monetary policy usage in March are essential [4].