CICC released a report, expecting that the third quarter revenue and net profit of listed domestic banks will decrease by 2% and increase by 1% year-on-year, which is basically the same as the second quarter. Net interest margin remains the main factor dragging down revenue, in line with market expectations. Compared to third-quarter performance, the current market focus is more on the recent implementation and impact of financial stimulus policies. The bank believes that policy catalyzing is expected to improve the asset quality of banks, increase dividend certainty, which are key variables affecting bank stock prices. Therefore, even if performance is relatively flat, the outlook for the sector is positive.
The bank pointed out that the net interest margin of domestic banks is still declining, but the rate of decline is narrowing; the conversion of bonds may lead to another decrease in yields. The bank expects the net interest margin of listed banks in the third quarter to drop by 1 basis point quarterly, corresponding to an 18 basis point decrease year-on-year, a narrowing of the decline compared to the 21 basis point drop in the second quarter, with net interest income falling by 3% year-on-year. Looking ahead, considering factors such as downward adjustments in existing mortgage rates, potential LPR adjustments, income rate reduction from debt swaps, and offsetting deposit listing rates reduction, it is expected that the full-year net interest margin will narrow by 16 and 7 basis points.
CICC is bullish on the valuation restoration of the banking sector under policy catalyzing, mainly driven by the expected improvement in asset quality under the bond policy, as well as the special investment value brought by stable dividend returns. At the individual stock level, attention is focused on the more obvious business competitiveness of CM Bank (03968.HK), Bank of Ningbo (002142.SZ), Jiangsu Changshu Rural Commercial Bank (601128.SH), large state-owned banks, as well as the reform and transformation progress of Chongqing Rural Commercial Bank (601077.SH) and Bank of Nanjing (601009.SH).
