Group 1: Report Industry Investment Rating - Not provided in the content Group 2: Report's Core View - In October, the net financing of certificates of deposit (CDs) turned positive, and there was a phenomenon where primary market price increases led to a slight rise in secondary market interest rates. The increase in CD supply pressure in October may be due to the decline in the NSFR of some joint - stock banks and preparations for the "good start" at the beginning of next year [3][7][19]. - The pressure on the NSFR of joint - stock banks may have decreased with the significant increase in their net CD financing. The probability of a significant increase in the overall supply pressure of bank CDs this year, which could lead to a situation similar to that in Q1 where primary market price increases drive a sharp rise in secondary market interest rates, is relatively limited [4][43][45]. - In the baseline scenario, the central range of DR001 in November may be similar to that in October, remaining between 1.3% - 1.4%. Further decline in funding rates may require a policy rate cut [4][50]. - The central bank's resumption of bond purchases reflects that the current fundamental environment still requires monetary easing support. The central bank's interest - rate cut cycle is not over, and it is only a matter of time before the interest - rate cut is implemented. It is expected that the CD interest rate will fluctuate between 1.55% - 1.65% this year [4][52][53]. Group 3: Summary by Related Catalogs I. Q3 CD Supply - Demand Environment was Favorable, and the Widening Spread with Funds may be Disturbed by the Rise in Short - Term Interest Rates - In 2025, CD interest rates first rose, then fell, and finally stabilized. After the interest - rate cut in May, the 1Y AAA - rated CD interest rate basically fluctuated within the range of 1.6% - 1.7% [7]. - From May to September, banks' liability pressure was relatively limited. Asset - side credit growth slowed down, and the liability - side funding was loose. The central bank increased medium - term liquidity injection, resulting in negative net CD financing [10]. - Since Q2, non - bank institutions' demand for CDs has remained high. The spread between CDs and funds has widened, which is related to the weakening of the central bank's "timely reserve - requirement ratio and interest - rate cut" statement and the rise in short - term policy - financial bond yields [12][14]. - CDs are more resilient than policy - financial bonds. In the current supply - demand environment, the 30BP spread between CDs and funds may be at the upper limit of the fluctuation range, and it may be difficult to break through the 1.7% high in September [18]. II. The Increase in the Net Financing of Joint - Stock Bank CDs in October may be Affected by the Decline in NSFR and Preparations for the "Good Start" - In October, the net financing of CDs turned positive again, especially for joint - stock banks. From the perspective of asset - liability matching, commercial banks may not have significant liability pressure [19][20]. - The view that banks increase CD issuance at the end of the year to preserve next year's issuance quota may not be the main reason for the increase in CD issuance scale [23]. - Although the central bank's monetary policy tools were tilted towards large - scale banks in Q3, from the overall asset - liability perspective, the liability gap of small and medium - sized banks was not significantly higher than that of large - scale banks [31][33]. - In Q3, the NSFR of large - scale banks improved, while that of joint - stock banks declined. The decline in the NSFR of some joint - stock banks may be an important reason for the increase in their CD issuance scale in October. Some banks with relatively stable NSFR indicators may also be preparing for the "good start" at the beginning of next year [35][36]. III. The Decline in the NSFR of Joint - Stock Banks may be Affected by Deposit Migration and Increased Bond Investment, but the Related Pressure may have Gradually Eased after October - The increase in the NSFR of large - scale banks is due to the decline in the growth rate of required stable funds and the increase in the growth rate of available stable funds, which is related to the change in deposit structure [38]. - For small and medium - sized banks, the growth rate of required stable funds increased, while the growth rate of available stable funds decreased. Deposit migration may have reduced their liability costs but also put pressure on their NSFR [40]. - With the significant increase in the net CD financing of joint - stock banks, the pressure on their NSFR may have decreased, which is reflected in the increase in their reverse - repurchase scale [43]. - It is expected that the net financing scale of government bonds in November will rise but still be lower than that in the first three quarters. The central bank's possible purchase of treasury bonds is beneficial to the alleviation of bank liability pressure and the improvement of NSFR [45]. IV. CD Interest Rates may Remain Volatile and Decline at the End of the Year, with a Slight Downward Shift in the Central Range - In October, the spreads between DR001, DR007, and OMO reached new lows, and the funding volatility remained low. The current funding relaxation is the central bank's response to the fundamental environment [46]. - DR001 still has 10BP of downward space, but even if the lower limit drops to 1.2%, its central range may not decline significantly, and the volatility may increase. In the baseline scenario, the central range of DR001 will remain between 1.3% - 1.4% [50]. - The central bank's resumption of bond purchases reflects the need for monetary easing. Although there is uncertainty about the timing of the interest - rate cut, it is expected that the CD interest rate will fluctuate between 1.55% - 1.65% this year [4][52][53].

Investment Rating - Industry Rating: Outperform the market (maintained rating) [8] Core Insights - Since October, the issuance of certificates of deposit (CDs) by joint-stock banks has significantly increased, with a notable rise in pricing demands, particularly among joint-stock banks [2][14] - The NSFR (Net Stable Funding Ratio) for joint-stock banks may face pressure by the end of the year, primarily due to the trend of short-term deposits and a significant decline in credit growth [3][30] - There is a need for proactive measures to address the asset-liability gap pressure expected in early 2026, with a focus on issuing CDs to meet funding needs [4][31] - The usage rate of the备案额度 (recorded quota) for joint-stock banks is lagging behind previous years, indicating a potential need to issue short-term CDs to secure future quotas [5][41] - The expected central price for 1Y CDs is around 1.70%, influenced by the current monetary policy stance and the average cost of liabilities for banks [6][54] Summary by Sections 1. Increase in CD Issuance - The net financing of CDs by joint-stock banks reached 520.8 billion, the highest level for the same period since 2021 [14] - The issuance of CDs has shown a balanced approach between short and long terms, with significant net financing in 3M, 6M, and 1Y CDs [14][15] 2. NSFR Pressure - The NSFR for most joint-stock banks is between 105%-110%, which, while above the regulatory minimum, still requires careful management [3][19] - The trend of short-term deposits is worsening, leading to increased pressure on the NSFR [22][30] 3. Preparing for Asset-Liability Gaps - Anticipated credit growth in Q1 2026 may reach 100% of the total, necessitating early issuance of CDs to meet funding demands [4][33] - General deposit growth is expected to face challenges in early 2026 due to various factors, including the cancellation of manual interest compensation [36][38] 4. Slow Usage of Quota - As of October 27, the usage rate of the备案额度 for joint-stock banks was only 59.1%, significantly lower than in previous years [5][41] - Some banks may issue short-term CDs to occupy quota space and ensure stability in future applications [45][48] 5. Expected CD Rate - The average cost of liabilities for joint-stock banks is approximately 1.71%, with the expected rate for 1Y CDs around 1.70% [6][54] - The current monetary policy is expected to remain supportive, preventing significant increases in CD rates [52][54]