Open source Securities: Nationwide large bank bills saw a significant increase in August, and the continued trend of deposit detachment.

Open Source Securities released a research report stating that since July, the gap in loan and deposit growth rates between national large banks has begun to converge, with the recovery trend continuing in August. In August, large banks and medium and small banks saw year-on-year growth in deposits, but there were significant structural differences. Some medium and small banks lack custody licenses, leading to a lack of growth in non-bank deposits, which may reflect a shift in current risk preferences of residents, with investment products moving from medium and small banks to large banks. In addition, in August, there was a high year-on-year increase in bill financing for large banks, while bill growth for medium and small banks slowed down, reflecting weak demand for large banks still relying on bill financing to compensate for scale. The power, while medium and small banks have weakened the power to increase scale through low-interest bills, helping them alleviate the downward pressure on interest margins. The main points of Open Source Securities are as follows: Continued recovery in the gap in loan and deposit growth rates in August Since July, the gap in loan and deposit growth rates between national large banks has begun to converge, with the recovery trend continuing in August. At the end of August, the gap in loan and deposit growth rates between national large banks was -2.17%, a narrowing of 0.85 percentage points compared to the end of July; Among them, the gap in loan and deposit growth rates of the four major banks was -2.79%, a decrease of 1.06 percentage points compared to the previous month; the growth rate gap for medium and small banks remains higher than that of large banks (end of August was -1.88%). In terms of structure, various types of deposits from residents are still in fixed terms, with unit fixed-term deposits for medium and small banks continuing to grow, while unit deposits for large banks are accelerating the transformation into wealth management. Various types of banks saw year-on-year growth in deposits, mainly driven by non-bank deposits for large banks In August, large banks and medium and small banks saw year-on-year increases in deposits, but there were significant structural differences. Firstly, the scale of unit deposits for national large banks continued to decline in August, with the rate of decline in demand deposits slowing down. Although the impact of the suspension of manual interest supplementation by regulators is gradually fading, under weak expectations, the channel for the conversion of residential deposits to enterprises is still obstructed, especially since the real estate market has not yet seen a clear turning point, and the cash flow of real estate developers is still under pressure; Secondly, large banks added 995.8 billion yuan in non-bank deposits in a single month, which contributed mainly to deposit growth, while the scale of non-bank deposits for medium and small banks declined. On the one hand, some medium and small banks lack custody licenses, leading to weak growth in non-bank deposits, while, on the other hand, this may reflect a change in the current risk preferences of residents, with investment products moving from medium and small banks to large banks; Thirdly, the scale of unit fixed-term deposits for medium and small banks continued to expand, while large banks continued to reduce the scale. This is mainly due to the asset shortage, with the relatively higher price of fixed-term deposits for medium and small banks leading to the loss of some customers for large banks. In addition, the semi-annual report also showed that the interest income decline for large banks has expanded (while other banks have improved), so large banks may increase their efforts to reduce high-cost deposits in order to stabilize interest margins. Combined with the financial data for August, with fiscal deposits showing a year-on-year increase of 567.5 billion yuan, the issuance of local government bonds and special national bonds has accelerated, but there is still a time gap between fundraising and allocation. Fiscal expenditure may strengthen in the last month of September, with funds mainly directed towards infrastructure investment. During this process, the growth of deposits for large banks, which have a customer base advantage, may be driven by fiscal expenditure, and the gap between loans and deposits for large banks may continue to recover. With weak credit demand, various types of banks are accelerating bond allocations In August, large banks and medium and small banks saw year-on-year increases of 233.2 billion and 140.9 billion yuan in domestic loans, respectively, with credit expansion remaining weak for all types of banks. On the one hand, the central bank's credit control strategy of "activating stock, reducing idle balances", as well as the shift in the financial industry's quarterly GDP accounting method from scale indicators to income indicators, both reflect a weakening of the government's and regulatory authorities' requirements for bank scale; on the other hand, under weak expectations, individuals and enterprises lack the motivation to leverage, resulting in insufficient credit allocation during the process of demand recovery. In addition, large banks saw a high year-on-year increase in bill financing, while bill growth for medium and small banks slowed down, reflecting the fact that under weak demand, large banks still have the momentum of bill financing to make up for scale, while medium and small banks have weakened the power to increase scale through low-interest bills, helping them alleviate the downward pressure on interest margins. In August, large banks and medium and small banks saw year-on-year increases of 431.6 billion and 429.4 billion yuan, respectively, in bond investments, with an accelerated allocation to bonds. Although bond yields have decreased to low levels, the current macroeconomic situation is still in a steady recovery stage, and there is still bullish sentiment in the bond market. From a trading perspective, the opening of space for interest rate cuts and reserve requirement cuts may further drive down bond yields; in terms of allocation, the acceleration of supply of government bonds may help alleviate the asset shortage for banks. Investment recommendation The current macroeconomic situation is still in a stage of weak recovery, with no clear signals of credit demand recovery, downward pressure on yield rates on the asset side continues to suppress interest margins, and banks still face significant external pressure in their operations. However, the mid-term bank performance remains resilient, and with the passage of time and the accumulation of positive policy factors, there is still hope for economic recovery and improvement in the banking operating environment. Continuation of mid-term investment views: State-owned banks with growing revenue and profits, controllable risks in retail business, benefiting from Agricultural Bank of China; High-quality banks benefiting from dividend strategies, such as CITIC BANK (601998.SH) and Shanghai Rural Commercial Bank (601825.SH); Banks with advantages in corporate business, such as Bank of Jiangsu (600919.SH), Bank of Changsha (601577.SH), Bank of Chengdu (601838.SH), Jiangsu Jiangyin Rural Commercial Bank (002807.SZ); Focus on the valuation recovery of core banking assets under economic recovery, with potential benefits for China Merchants Bank (600036.SH) and Bank of Ningbo (002142.SZ). Risk warning: Downward trend in macroeconomic growth, policy implementation falling short of expectations, etc.