The Zhitong Finance App learned that Changjiang Securities released a research report saying that PB valuations of bank stocks have been completely “broken” since the second half of 2023. Among them, urban investment and real estate risks are the core influencing factors. As CITIC Chemical Bonds mitigate liquidity risks, the real estate policy will be further relaxed, which will strengthen the logic of improving asset quality, open up valuation limits, and be optimistic that the valuation of high-quality bank stocks will return above 1.0xPB. At the individual stock level, we focus on recommending China Merchants Bank (600036.SH), which has high dividends and real estate attributes, Changshu Bank (601128.SH), a high-performing stock driven by recovery expectations, Bank of Ningbo (002142.SZ), which has been deeply adjusted since 2023, and Bank of Hangzhou (500926.SH). Small and medium-sized banks recommend Ruifeng Bank (), Qilu Bank (USD), and Bank of Xiamen (Sichuan). 601528.SH 601665.SH 601187.SH Major state-owned banks focus on the high dividend value of H shares.

The main views of Changjiang Securities are as follows:

Since this year, bank stocks have sequentially traded high dividends, strong performance, and stable real estate expectations

Since 2024, bank stocks have continued to rise amid market differences, and some individual stocks have reached new highs. Changjiang Securities pointed out that the market's concerns about bank stocks at the beginning of the year were mainly due to the fact that macroeconomic expectations did not recover significantly, and there was even an accelerated downward trend in the real estate market. At the same time, banks' fundamentals are affected by factors such as continued interest rate cuts. There is downward pressure on performance, and the quality of real estate and retail credit assets is still under pressure. However, in reality, the deeply adjusted valuations for the second half of 2023 already reflect too much pressure, and expectations are more pessimistic than fundamental.

Judging from the specific trading logic, bank stocks in the first quarter mainly reflected the revaluation of dividend values, compounded by large market fluctuations, and the defensive properties of high-dividend bank stocks were prominent. Typical examples of dividend value include major state-owned banks, the Shanghai Agricultural Commercial Bank, etc. Most banks with high dividend labels have continued to rise. However, major state-owned banks experienced phased adjustments due to a slight decline in profits in the first quarter, while banks such as the Shanghai Agricultural Commercial Bank continued to reach new highs driven by the mid-term dividend logic.

Changjiang Securities insists that dividend value revaluation is the core logic of the banking sector, and it continues to be optimistic about the valuation repair of banks with high dividends in the medium to long term. At the same time, around the quarterly report, the market's attention to banks with high performance growth rates increased dramatically. Typical examples are that Changshu Bank and Bank of Hangzhou continued to rise. Under difficult macroeconomic conditions, high-performing bank stocks still achieved steady and continuous high growth, which is clearly superior to market expectations, which is the core of this type of asset revaluation. Since May, real estate policy expectations have heated up, and policies have been implemented one after another. Bank of Ningbo and China Merchants Bank, which are highly related to economic recovery expectations, have accelerated their rise.

Currently, the three major logics continue to be implemented, and expectations to improve asset quality are driving valuations to the next level

Regarding the logic of stabilizing real estate, with the release of a package of real estate easing policies on May 17, expectations for improving bank asset quality are of great significance. Changjiang Securities believes that the real estate pressure currently facing bank asset quality is reflected, on the one hand, in the narrow sense of real estate versus public loan risk, and on the other hand, it is also affected by the potential risk of collateral assets that may result from a continued decline in housing prices. The market may continue to observe the actual effects of the new package of policies, but for banks, any policy conducive to real estate sales or marginal stabilization of housing prices and marginal improvement in the liquidity of housing enterprises will be beneficial. The bank itself is continuing to resolve bad real estate debts through business performance, and external policy help or support will reduce the potential pressure to resolve risks, and expectations for asset quality improvements are more clear.

Regarding the logic of high dividends on bank stocks, some investors in the market are worried

A steady recovery in long-term interest rates, or a shift in the equity market style, may cause dividend assets to be abandoned. Changjiang Securities emphasized that the market style is not at all the core logic of dividend value revaluation; it only affects short-term stock price elasticity, and the decline in dividend rates and rising valuations of dividend assets do not necessarily require long-term interest rates to decline simultaneously. Judging from the macro interest rate environment, the economy is likely to stabilize, but recovery flexibility is still insufficient, and the pressure of scarce assets continues. As of May 14, the yield on 10-year treasury bonds was 2.31%, and the average dividend rate of the five major A-share banks was 5.41%. Interest spreads are still high. Furthermore, bank stocks are actively promoting mid-term dividends, which will further enhance the sector's dividend ratio attractiveness.

Regarding the logic of performance growth, the fundamentals of the banking industry are still under pressure due to the macroeconomic environment this year, and the pressure is expected to be difficult to ease throughout the year. However, for some high-performing bank stocks, they can maintain their outstanding performance. For example, Changshu Bank is expected to continue to achieve a high revenue and net profit growth rate throughout the year, and the Bank of Hangzhou's net profit is also expected to continue to grow at a high rate. Performance sustainability supports a recovery in the valuations of such banks.

Risk warning: The actual demand for financing in society continues to be sluggish; economic pressure has led to a marked deterioration in the quality of bank assets.