The Zhitong Finance App learned that Zhongtai Securities released a research report saying that the economy determines banks' stock selection logic, and that weak and strong economic recoveries correspond to different target varieties. 1. The fundamentals of high-quality urban agricultural commercial banks are highly deterministic. Choose urban agricultural commercial banks with cheap valuations. The bank continues to recommend Bank of Jiangsu (600919.SH), Bank of Changshu (601128.SH), and Ruifeng Bank (601528.SH). We also recommend Chongqing Agricultural Commercial Bank (601077.SH), etc. Second, the economy is recovering weakly, benefiting from debt conversion. Large banks are selected: Agricultural Bank, Bank of China, Post and Storage, ICBC, CCB, etc. Third, expectations for economic recovery are strong, and core assets among banks were selected: Bank of Ningbo (002142.SZ), China Merchants Bank (600036.SH), and Bank of Ping An (000001.SZ).

The views of Zhongtai Securities are as follows:

Monthly market review: 1. The overall stock market declined this month. The Shanghai and Shenzhen 300 Index fell 1.9%, the overall banking sector fell 0.4%, and banks achieved a relative profit of 1.5% compared to the Shanghai and Shenzhen 300. 2. The rise and fall of individual stocks this month: Most A-share bank stocks fell this month. The banks that rose were mainly Chengnong Commercial Bank. The top 5 stocks with cumulative monthly gains in A-shares were Industrial Bank, Bank of Wuxi, Bank of Nanjing, Bank of Qilu, and China Construction Bank, with monthly increases of 11.03%, 2.85%, 2.22%, 1.82%, and 1.72%, respectively (Societe Generale mainly saw a large increase in year-end collective bidding; the main shareholder of Wuxi, will increase its holdings after the announcement of Great Wall Life).

Key industry policies for this month: The Central Economic Work Conference was held this month, and it was proposed that a 24-year active fiscal policy should be moderately strengthened to improve quality and efficiency. A sound monetary policy should be flexible, moderate, precise and effective. At the same time, Beijing and Shanghai have introduced a series of real estate easing policies.

Key announcements from listed banks: 1. Personnel changes: Sunong, the board of directors of Changshu Bank changed; Mr. Zhu Jian, vice chairman of the Bank of Shanghai, resigned as vice chairman of the company due to organizational changes. 2. Shareholder increase: Bank of Ningbo: Youngor Group Co., Ltd., a shareholder holding 5% or more of the company's total share capital, increased its shareholding ratio from 8.32% to 9.97%; Industrial Bank: Fujian Port Group and its subsidiaries increased their holdings of the Company's shares by a total of 558,571,624 shares through centralized bidding transactions through the Shanghai Stock Exchange trading system. Consolidated holdings of 581,321,624 shares of the Company, accounting for 2.80%. Bank of Wuxi: The State Financial Supervisory Administration approved the approval of Great Wall Life Insurance Co., Ltd. to increase its stock holdings within six months from the date of approval. 3. Remuneration claims: China Merchants Bank and Bank of Xi'an passed board resolutions on compensation claims.

Capital price tracking: 1. The yield on one-year and ten-year treasury bonds declined, and term spreads narrowed. The yield on one-year treasury bonds this month was 2.08%, down 26 bps from the previous month, and the 10-year maturity yield was 2.56%, down 11 bps from the previous month; the maturity spread was 0.48%, down 14 bps from the previous month. 2. Bank note rediscount interest rates have declined. The rediscount interest rate for half-year China Stock Bank notes this month was 1.18%, and the rediscount interest rate for semi-annual urban commercial bank notes was 1.31%, down 2 bps from the previous month. 3. Interest rates on interbank deposits have increased. The overall stock cost of listed bank interbank deposits increased by 7 bp to 2.56% in December.

Credit risk tracking: 1. Credit risk tracking: Both the number and amount of defaults have declined. In December 2023, a total of 3 credit bonds from 2 companies defaulted or rolled over, with a total issuance scale of 2.02 billion yuan. The number and amount of credit bonds defaulted this month were significantly lower than the previous month. 2. Credit tracking of defaulted real estate companies: Among the companies that will focus on in December 2023, Country Garden and Fujian Sunshine Group Co., Ltd. have large debts due next month. According to statistics on the maturity of each enterprise's debt in January 2024, the amount of domestic and international debt due next month will increase compared to the previous month.

Sector investment advice: The economy determines the bank's stock selection logic, and the recovery of weak and strong economies corresponds to different target varieties. 1. The fundamentals of high-quality urban agricultural commercial banks are highly deterministic. Choose urban agricultural commercial banks with cheap valuations. We continue to recommend Bank of Jiangsu, which benefits from regional beta, has strong ability to manipulate various assets, and is driven by the consumer finance troika to make up for interest spreads. Changshu Bank, which relies on a basic market with small and micro characteristics, is small and diversified. It is less affected by chemical bonds and stock mortgages, and maintains excellent asset quality. Ruifeng Bank, which is deeply involved in the transformation of small, micro and retail, is based in Shaoxing, which has a developed private economy, and has strong regional economic certainty. We also recommend Chongqing Agricultural Commercial Bank, Shanghai Agricultural Commercial Bank, and Qilu Bank. Second, the economy is recovering weakly, benefiting from debt conversion. Choose large banks: Agricultural Bank, Bank of China, Post and Storage, ICBC, CCB, etc.) Third, expectations for economic recovery are strong, and core assets among banks were selected: Bank of Ningbo, China Merchants Bank, and Bank of Ping An.

Risk warning event: The economic downturn exceeded expectations. The economic recovery fell short of expectations.