Hua Fu Securities' analysis of the mid-year data of 42 listed banks: Stable profit growth, strengthened medium-term dividends support high dividend investment logic.

Huafu Securities released a research report stating that as of now, a total of 11 banks have announced their mid-year dividend payout ratio, with many banks having a mid-year payout ratio exceeding 30%. The mid-year dividend payout of banks strengthens the investment logic of high dividend bank stocks. Currently, China is in an economic transition period, and bank stocks that provide stable cash returns are more cost-effective investments. In terms of investment targets, Shanghai Pudong Development Bank (600000.SH) is recommended. The bank is currently in a phase of turnaround, with its non-performing loans close to being cleared out, the NPL generation rate continuously decreasing, and marginal improvement in credit costs, indicating potential for profit elasticity. Moreover, the bank has increased its credit lending since the fourth quarter of last year, and the enhanced momentum of credit asset lending is expected to drive revenue growth. It is also recommended to pay attention to Bank of Jiangsu (600919.SH), a high dividend yield regional bank. Huafu Securities' main points are as follows: Performance: Revenue growth rate marginally slows down, while profit growth rate remains relatively stable In the second quarter, revenue growth slowed down. Looking at the change in quarterly revenue growth from the first quarter, 25 listed banks showed a marginal slowdown, while 17 listed banks showed marginal improvement. Overall, the average change for all listed banks is -2.2 percentage points. The second quarter saw a relatively stable growth rate in net profit attributable to shareholders. Comparing the growth rate of net profit attributable to shareholders in the second quarter to that of the first quarter, 25 listed banks experienced a marginal slowdown, while 17 listed banks showed marginal improvement. Overall, the average change for all listed banks is -0.6 percentage points, maintaining a relatively stable state. Net interest margin: Continues to decline, but the year-on-year decline is expected to gradually stabilize Looking at the change in net interest margin in the second quarter compared to the first quarter, 33 listed banks experienced a marginal decline, while 9 listed banks showed marginal improvement. The year-on-year decline in net interest margin is expected to gradually stabilize. Overall, influenced by the lowering of the Loan Prime Rate (LPR) and increased market competition, the net interest margin continued to decline in the second quarter, with an average change of -4.5 basis points. Looking ahead to the next stage, the net interest margin is expected to continue to decline, but with favorable factors on the liability side accelerating, the year-on-year decline in net interest margin is expected to stabilize. Loan issuance: Growth is slowing down, shifting from scale thinking to structure thinking Comparing the loan growth rate in the first half of the year to the first quarter, 35 banks are showing a trend of marginal slowdown. Firstly, under regulatory guidance, banks are downplaying the emphasis on scale and focusing more on loan structure and quality. Secondly, influenced by insufficient real demand, loan demand has also decreased accordingly. 7 banks showed a marginal improvement in loan growth rate, especially banks located in the Yangtze River Delta, reflecting a faster recovery in the real economy and credit demand in the region. It is expected that the trend of de-emphasizing scale and focusing on structure and quality will continue in the next stage. Fee income: In a slow recovery process in the first half, with an expected acceleration in the second half Looking at the change in fee net income growth in the second quarter compared to the first quarter, 19 banks are still in the process of exploring the bottom, while 20 banks have achieved varying degrees of recovery, with a narrowing of the decline. Looking ahead to the second half of the year, with the support of economic recovery and improved market environment, coupled with the low base effect from last year, fee net income growth is expected to bottom out and rebound. Other non-interest income: Contribution is weakening, expected to further weaken under the high base effect from last year Since the fourth quarter of 2023, the bond market has been strong, and banks have gained relatively high returns from bond investments. In the first quarter of 2024, other non-interest income made a significant contribution to revenue. In the background of a slowing decline in long-term interest rates in the second quarter, the contribution of other non-interest income has weakened. Looking at the change in non-interest income growth in the second quarter compared to the first quarter, 27 banks showed a clear slowdown in other non-interest income. Looking ahead to the second half of the year, under the impact of the high base effect from the fourth quarter of last year, it is expected that the growth rate of other non-interest net income will further decline. Asset quality: Attention to non-performing loan rates has slightly increased, while provision coverage ratio has slightly declined Non-performing loan rates were relatively stable. Looking at the change in non-performing loan rates at the end of the second quarter compared to the end of the first quarter, 18 banks maintained the same rate, 14 banks saw a marginal decrease, and 10 banks saw a slight increase. There was some fluctuation in the attention rate. Looking at the change in the attention rate at the end of the second quarter compared to the end of the first quarter, 25 banks saw an increase, 8 banks saw a decrease (other banks did not disclose their attention rate), partly due to the stricter asset classification policy and pressures on asset quality in the retail sector. The provision coverage ratio saw a slight decline. Looking at the change in the provision coverage ratio at the end of the second quarter compared to the end of the first quarter, 25 banks saw a marginal decline, while 17 banks saw a slight increase. Overall, the provision coverage ratio remains at a relatively high level. Mid-term dividend payout: Several banks have announced specific mid-term dividend payout plans As of now, a total of 11 banks have announced their mid-term dividend payout ratio, with many banks having a mid-term payout ratio exceeding 30%. The mid-term dividend payout of banks strengthens the investment logic of high dividend bank stocks. Currently, China is in an economic transition period, and bank stocks that provide stable cash returns are more cost-effective investments. Risk Warning Policy effects may not meet expectations, and market style shift.