According to the information from the Financial Channel App, Yan Mei, director of g china fin's research in investment banking, expressed that although loan growth further slowed down, the decline in net interest income may narrow due to the overall stabilization of the net interest margin. Due to regulatory guidance on reducing fees, fee income may still be weak, but trading and investment income in the third quarter may continue to show good growth (average year-on-year growth of 30.4%). In addition, as the space for further reducing credit costs is limited, g china fin expects that strengthening control of operating expenses will support net income growth. Overall, it is expected that the performance of the banking sector in the third quarter will show more significant improvement.

Stock banks and local banks seem to be more cyclical, trending with the bull market, while state-owned banks lean towards counter-cyclicality. g china fin believes that in the coming years, the Chinese government does have a stronger willingness to support the real economy and the stock market, which is expected to lead to a slow bull market. Currently, due to some unclear policy details, such as the extent of fiscal stimulus, combined with the uncertainty of the US elections, bank stocks in the H-share/A-share market are expected to outperform, especially large banks. High dividend yields, 'predictable' earnings, and low valuations make domestic bank stocks still have investment value.

Yan Mei expects that for the state-owned banks covered, the year-on-year growth rates of income, pre-provision profit, and net income in the third quarter of 2024 may improve to -1.9%, -1.7%, and 0.4% respectively, while local banks may see growth rates in the third quarter decrease to 3.1%, 4.1%, and 9.1%.

Benefiting from the lower financing costs and active adjustment of asset structure, it is expected that the quarter-on-quarter decline in net interest margin of Chinese banks may further narrow. The net interest margin is expected to decrease by 2 basis points quarter-on-quarter in the third quarter and decrease by 15 basis points year-on-year (compared to a 3 basis points decrease quarter-on-quarter and 20 basis points decrease year-on-year in the second quarter).

Looking ahead, Yan Mei mentioned that negative impacts may arise from the reduction of existing home loan rates by around 50 basis points starting from the end of October, which may result in a decrease of only 1 to 2 basis points in the net interest margin in the fourth quarter of 2024. The majority of the total impact of 5 to 6 basis points will be reflected in 2025, along with the additional pressure from further lowering the LPR. However, deposit rates will be lowered to offset this impact. Another downside risk may be the trading and investment income of banks, as significant bond sales and wealth management redemptions may drag down the MTM investment income.

As more measures to boost the stock market are implemented (including providing 500 billion yuan liquidity to non-bank financial institutions for stock purchases), there remains uncertainty in the investment sentiment in wealth management products and the bond market.