Investment Rating - The report assigns a "Buy" rating to several banks, including ICBC-H, CCB-H, and BOC-H, based on their above-peer dividend yield and attractive valuations [11]. Core Insights - The net interest margin (NIM) is expected to diverge between large banks and regional banks, with regional banks likely to perform better due to higher risk appetite and benefits from time-deposit rate cuts [2]. - Policy-financing instruments are anticipated to support loan growth into 1Q26E, potentially driving new loans of RMB2.5 trillion to RMB5 trillion [3]. - Overall asset quality remains stable, but there is increasing pressure on developer loans and non-mortgage retail loans, with manageable credit risk in mortgage loans [4][7]. - Fee income is improving due to strong agency and custodian fees, although a potential fee rate cut in mutual funds could impact future income [8]. - Big banks maintain flattish earnings growth guidance for 2025E, while regional banks like BOCD and BONJ expect around 5% to 8% earnings growth [9][10]. Summary by Sections Net Interest Margin (NIM) - NIM pressure is expected to moderate into 4Q25E, with large banks anticipating continued year-on-year compression in 2026E [2]. Loan Growth - The distribution of RMB500 billion in policy-financing instruments is expected to enhance loan growth, particularly for banks with higher exposure to infrastructure [3]. Asset Quality - Asset quality is stable overall, but there are rising pressures in developer loans and non-mortgage retail loans, with manageable risks in mortgage loans [4][7]. Fee Income - Fee income has improved, driven by strong performance in asset management, though future fee income may be affected by rate cuts [8]. Earnings Growth - Big banks expect flattish earnings growth in 2025E, while regional banks forecast modest growth, with specific banks like PAB expecting a return to positive year-on-year growth in 2026E [9][10]. Valuation and Equity Raising - The market is focused on potential equity raising, particularly for regional banks trading below 1x book value, which could open financing opportunities for others [10].

Investment Rating - The report does not explicitly state an investment rating for the industry or specific companies within it Core Insights - There is a sustained household allocation towards equity, with gradual relocations of household assets from property and deposits to the equity market. High net worth individuals are showing more interest in private/customized secondary market products, while general retail investors prefer industry/thematic ETFs due to lower risk appetite [2] - China brokers are experiencing a reacceleration in investment banking business, with regulators becoming more accommodative towards equity raising for onshore companies, particularly in H-shares. A robust deal pipeline is noted, with 88 companies in the H-share IPO pipeline [3] - M&A activity is expected to be more selective and strategic, focusing on enhancing sub-segment strengths and generating synergies rather than merely increasing asset scale [4] - There is a marginal relaxation in capital raising for China brokers, with proposals for general mandates for H-shares issuance, which could lead to potential equity raising opportunities [7] Summary by Sections Household Asset Allocation - Households are gradually shifting assets from property and deposits to equities, with a preference for passive equity index-linked products over actively managed funds due to lower risk appetite [2] Investment Banking - The investment banking business is seeing a reacceleration, particularly in H-shares, with a significant number of companies in the IPO pipeline. The focus is on industries benefiting from policy support [3] M&A Strategy - Future M&A activity is anticipated to be more strategic, with leading brokers likely to acquire mid/small-sized players rather than merging with other leading brokers due to regulatory complexities [4] Capital Raising - China brokers are observing a marginal relaxation in capital raising, with potential new equity raising opportunities under proposed mandates for H-shares issuance [7]