Industry Investment Rating - Neutral | Maintain [1] Core Insights - The report indicates that the banking sector is experiencing a stabilization phase, with a focus on credit issuance and interest margin improvement. The performance of the banking sector is expected to remain volatile due to changes in investor risk appetite and the rising profitability of technology growth sectors in the A-share market [6][32]. Summary by Sections Industry Overview - Closing Index: 4018.96 - 52-Week High: 4670.31 - 52-Week Low: 3552.99 [1] Banking Liquidity Review - From August 6 to September 25, the fluctuation of interbank funds was smaller than the same period last year. The DR007-OMO rates showed an upward trend in late August due to tax periods and improved bank credit issuance, followed by a downward trend in early September due to weak PMI data. By mid to late September, the rates increased again due to accelerated asset issuance by banks and regulatory compliance [12][17]. Monitoring of Liquidity Indicators - The usage of interbank certificates of deposit (CDs) improved due to increased medium to long-term funding from the central bank. However, the net financing growth of state-owned banks' CDs may decline marginally due to reduced deposit maturity volumes [5][18]. - The excess reserve ratio was measured at 1.29% in August 2025, remaining above levels from the past two years. The NSFR for large banks was 107.01%, consistent with the previous year, indicating a stable liquidity structure [23][27]. Investment Recommendations - The report suggests focusing on banks with significant deposit maturities and potential interest margin improvements, such as Bank of Communications and Chengdu Bank. Additionally, it recommends looking at state-owned banks that benefit from consumer loan interest subsidy policies, like China Merchants Bank [6][32].

Group 1 - The core viewpoint of the articles highlights the recent trend of decreasing deposit interest rates among major banks, with one-year fixed deposit rates dropping below 1%, prompting customers to seek higher returns through various financial products [1][2] - Following the reduction in deposit rates, customers are increasingly transferring their funds to bank wealth management products, money market funds, bond funds, and insurance products to achieve better yields [1][2] - The issuance rates of interbank certificates of deposit have shown a short-term increase, indicating a shift in banks' funding strategies as they face pressure on their liability side [2][3] Group 2 - Banks are focusing on managing their liability costs by optimizing deposit strategies, expanding demand deposits, and planning for central bank funding [3] - The long-term trend of declining deposit rates is expected to continue, which may lead to changes in residents' willingness to save, potentially resulting in a "deposit migration" phenomenon [2][3] - Banks are advised to enhance their proactive liability capabilities, such as issuing financial bonds, to manage the pressure from deposit outflows and maintain liquidity [2][3]

Core Viewpoint - The banking sector is facing significant liquidity pressure in June, with over 4 trillion yuan of interbank certificates of deposit maturing, alongside high net financing of government bonds, which poses challenges for banks' liability stability and liquidity management [1][2]. Group 1: Banking Sector Challenges - In June, the stability and liquidity management pressure of banks' liabilities have significantly increased due to the maturity of over 4 trillion yuan in interbank certificates of deposit and high net financing of government bonds [1][2]. - The recent reduction in deposit rates by major banks, ranging from 5 to 25 basis points, is expected to alleviate the pricing pressure on loan market rates but may challenge banks' ability to attract deposits, potentially weakening liability stability [1][2]. - Analysts indicate that the demand for liquidity among banks is becoming increasingly urgent, necessitating support from regulatory authorities, particularly the central bank, to provide adequate liquidity through monetary policy tools [1][2]. Group 2: Liquidity Management and Market Response - Despite the pressure on banks' liabilities, the central bank's actions, including increased reverse repos and stabilizing market expectations, have contributed to a slowdown in the upward trend of deposit rates, leading to an initial easing of liquidity tension [2][3]. - The central bank's proactive measures, such as announcing a 1 trillion yuan buyout reverse repo in advance, aim to counteract market sentiment related to the maturity of interbank certificates of deposit and prevent excessive tightening of liquidity [3]. - As of June 11, the weighted average rate of DR007 improved to 1.53%, down from approximately 1.6% at the end of May, indicating a marginal easing of banks' liability pressure under the central bank's liquidity support [3]. Group 3: Future Outlook - Industry experts anticipate that the liquidity environment in June will maintain a "steady yet disturbed" pattern, despite uncertainties from government bond issuances and tax payments [3][4]. - The central bank's approach to liquidity management is expected to focus on "smoothing disturbances," with operations aimed at maintaining a stable liquidity environment [4]. - Overall, the liquidity situation is projected to remain reasonably ample, with funding rates expected to fluctuate within a narrow range above policy rates [4].

Group 1 - Major commercial banks have lowered deposit rates, with one-year fixed deposit rates generally falling below 1% [1] - Smaller banks, such as city commercial banks and rural commercial banks, have also followed suit, with one to five-year fixed deposit rates now commonly in the "1" range, diminishing their competitive advantage [1] - Customers are shifting their funds from deposits to wealth management products, money market funds, bond funds, and insurance products to seek higher returns [1] Group 2 - The issuance rates of interbank certificates of deposit have recently increased, indicating a short-term rise in funding costs for banks [2] - The overall pressure on bank liabilities is attributed to declining deposit stability and increased reliance on active liabilities, compounded by the inability of loose monetary policy to fully offset funding demand [2] - Analysts predict that the long-term downward trend in deposit rates will continue, necessitating banks to enhance their active liability capabilities and manage high-cost deposits [2][3] Group 3 - Several listed banks are focusing on controlling liability costs, with strategies including optimizing deposit management and expanding demand for current deposits [3] - Banks are also planning to issue bonds and interbank certificates of deposit strategically when market interest rates are low to manage refinancing pressures [3] - The supply pressure of interbank certificates of deposit may not be sustainable in the medium to long term due to a lack of willingness among banks to actively expand their liability scale [3]