The Zhitong Finance App learned that GF Securities released a research report saying that fiscal issuance spending has entered an accelerated phase, domestic liquidity is easing, and the narrowing trend between China and the US will continue in the medium term. Cross-border liquidity is expected to improve. Judging from the banking sector's mapping, from the end of '24 to the beginning of '25, the high dividend sector may have a chance to switch valuations in January next year. Considering the weakening of the high dividend logic, the space and time for revaluation is weaker than the same period last year, and it is expected that 25 will move from a shortage of assets to recovery transactions.

The main views of GF Securities are as follows:

Market and fundamentals review:

Fundamentally, the 24Q1-3 performance growth rate of listed banks rebounded marginally. There are two core contributions: first, the decline in interest spreads has narrowed, the results of interest rate cuts on multiple rounds of deposit listing in the previous period have continued to show results, and debt costs have generally improved; second, the decline in interest rates in the bond market has brought other non-interest contributions on the trading side.

Market performance. Under the logic of scarce assets in the first half of the year, the high-dividend banking sector obtained relatively good excess returns. Since September, incremental policies have been introduced intensively. Expectations of a recovery in nominal returns weaken the logic of high dividends, and excess sector earnings have converged, and bank investment is expected to shift to recovery transactions.

Macroeconomic environment outlook: Focus on incremental fiscal intensity.

With increased fiscal strength, the growth rate of government departmental debt may drive the overall debt growth rate to rise somewhat, and it is expected that the macro leverage ratio will continue to rise. The real rate of return is expected to follow a steady recovery in nominal GDP growth. Currently, macroeconomic policies place more emphasis on consumption, which is expected to effectively hedge the impact of external geopolitics on the export side. At the same time, improved economic price signals may drive a recovery in nominal GDP growth, and ROIC is expected to rise steadily. With incremental fiscal implementation, it is expected that 24Q4-25Q2 will have a strong round of fiscal expansion, driving improvements in corporate profits and market expectations.

Inflation recovery targets are ahead of the ranking, and the central bank's monetary policy space has been opened up.

The central bank downsized and renewed the MLF in November, compounding the issuance of trillion refinancing and replacement special bonds at the end of the year. The probability of downgrading increased during the year. Against the backdrop of an increase in the supply of long-term bonds, the central bank may use new monetary policy instruments such as treasury bond trading and buyout reverse repurchases to invest in liquidity while stabilizing interest rates on long-term bonds.

On the credit side, the share of government bonds in social finance has risen further. Capital increases by the six major banks will drive a recovery in credit growth. It is expected that the growth rate of social finance will bottom out and rise again. In terms of pace, it is expected that the fiscal year will be ahead of schedule 25 years, and credit will remain uniform.

Industry sentiment outlook: The scale growth rate is expected to follow the recovery rate of social finance, and interest-bearing assets will increase 8.8% and 10% year-on-year in '24 and '25.

Interest spreads are expected to stabilize in the second half of '25; LPR is expected to be lowered once in '25, with 1y and 5y falling by about 20 bps; interest rates on deposit listings are expected to be lowered 2 times, by 10 bps and 30-40 bps, respectively; the impact on 25-year interest spreads is expected to be neutral. The decline in the revenue base effect is compounded by a recovery in the capital market and an increase in settlement volume, and the growth rate is expected to pick up.

Other non-interest contributions declined against the backdrop of improved economic expectations and the end of the asset shortage logic. The overall quality of assets is stable, and provision contributions are expected to decline. Listed banks' performance is expected to bottom up in the second half of next year, with revenue and net profit changing -0.2% and 4.1% year-on-year in '25.

Investment advice: Fiscal issuance spending has accelerated, and domestic liquidity is easing; the narrowing trend between China and the US will continue in the medium term, and cross-border liquidity is expected to improve.

Take a look at the banking sector mapping:

(1) Entering the institutional fund allocation window from the end of '24 to the beginning of '25, the high-dividend sector may have a chance to switch valuations in January next year. Considering the weakening of the high-dividend logic, the space and time for revaluation is weaker than in the same period last year.

(2) It is expected to move from asset shortage to recovery transactions in '25. The allocation strategy within the sector prioritizes recovery-related types China Merchants Bank (600036.SH,03968) and Bank of Ningbo (002142.SZ), which are more sensitive to economic influences, followed by Ruifeng Bank (601528.SH) and Changshu Bank (601128.SH), which have many small and micro asset-side customers and a short pricing period.

Risk warning: (1) economic performance falls short of expectations; (2) financial risk exceeds expectations; (3) fiscal policy falls short of expectations; (4) policy regulation exceeds expectations.