Tianfeng: Policy dividends continue to be added, continue to be optimistic about bank stocks

Tianfeng has released a research report stating that although the current performance of bank stocks may deviate from the industry fundamentals, future banking investment strategies need to pay more attention to signs of improvement in industry fundamentals. First, the cost of liabilities is expected to continue to improve. Second, asset returns are expected to stabilize. Finally, asset quality is expected to remain healthy. Based on the above, Tianfeng recommends focusing on Bank Of Chengdu and Jiangsu Changshu Rural Commercial Bank among high-quality regional small and medium-sized banks; and Agricultural Bank Of China, Bank Of China, and Postal Savings Bank Of China among state-owned banks. Tianfeng's main points are as follows: Buying bank stocks is equivalent to buying high-yield fixed income products Compared to other sectors, the banking sector has significant characteristics of high dividends and stable dividends. From an investment perspective, it is usually used as a defensive sector to increase safety margins. The banking sector has risen by 18.33% since the beginning of the year, outperforming the Shanghai and Shenzhen 300 Index's 17.49% increase. As of July 4, the weighted average dividend yield of the banking sector on wind was 3.40% higher than the 10-year national bond yield, still attractive to investors. Bank stocks are the cornerstone of China's financial market: they can attack and defend A-share listed bank stocks have defensive attributes and are stable. As of July 4, the weighted average increase of bank component stocks in the A-share listed second-tier sector of Citic Securities since the beginning of the year was 16.92%, ranking sixth. The high dividend and stable dividend characteristics of bank stocks enhance their defense investment attributes. In addition, because the market value of bank stocks is generally large (the average market value of individual stocks is 355.6 billion yuan, ranking first in the Citic second-tier sector), the volatility is relatively small. Looking at the trend of bank stocks this year, the banking sector as a whole is stable. Under the continuous policy dividend, bank stocks may become the "new darling" of investment First, on April 8, 2025, the China Banking and Insurance Regulatory Commission issued a notice on adjusting the ratio of insurance fund equity asset management, optimizing the supervision policy of insurance fund ratio, and increasing support for the capital market and the real economy. From the perspective of funds, the China Banking and Insurance Regulatory Commission has raised the upper limit of equity asset allocation ratio and the "efforts to have large state-owned insurance companies invest 30% of new premiums in A-shares each year starting from 2025". In the current "asset shortage", combined with the above policy guidance, the certainty of insurance fund allocation increases. Second, on May 13, 2025, the China Securities Regulatory Commission issued the "Action Plan for Promoting the High-Quality Development of Public Fund", which requires strengthening the constraints of performance benchmarks. As of the end of 2024, active equity fund positions in the banking sector accounted for 3.35%, while the benchmark index such as the Shanghai and Shenzhen 300 had a weight of 15.71% in the banking sector. Theoretically, there is still 12.36% room for bank stock allocation. Investment recommendations Although the current performance of bank stocks may deviate from industry fundamentals, future banking investment strategies need to pay more attention to signs of improvement in industry fundamentals. First, the cost of liabilities is expected to continue to improve. Second, asset returns are expected to stabilize. Finally, asset quality is expected to remain healthy. Based on the above, Tianfeng specifically recommends Bank Of Chengdu and Jiangsu Changshu Rural Commercial Bank among high-quality regional small and medium-sized banks; and Agricultural Bank Of China, Bank Of China, and Postal Savings Bank Of China among state-owned banks. Risk warning: macroeconomic fluctuations, possible exposure of non-performing assets, and increased pressure on interest rate spreads.