Sino-Thai 2025 Bank Sector Investment Strategy: Continuation of high dividend strategy, focus on high-quality regional banks and joint-stock banks.

Zhongtai released a research report on the investment strategy for the banking sector in 2025. The report states that in the first half of the year, the economic inertia continues, and it is expected that high dividend-paying safe havens will still dominate; at the same time, considering the current market preference improvement + the divergence in future economic expectations, the following three clues can be derived: high dividend-paying banks; city commercial banks with location advantages and strong certainty; core assets. In the second half of the year, focus on the implementation effects of policies: if policy clues are clear and policy effects are evident, look for varieties that align with policy themes; if the economic recovery is still below expectations, return to high dividend-paying safe haven varieties. Policy outlook: focus on key areas such as the bond market, real estate, consumption, and exports. Bonds: Local government debt pressure has been partially relieved, with the withdrawal of non-standard debts and the reduction of the scale of urban investment bonds, the proportion of bank loans in the overall urban investment debt is expected to increase, and policy credit business is expected to remain a major source of bank credit growth. Real estate: The relaxation of policies and the recovery of the market will present a dynamic game process, and it is expected that the future supply of the real estate market will depend on the strength of central SOE mortgages, and the demand side will depend on the recovery of residents' income expectations. Consumption: Central deleveraging is evident, and next year the central government may continue to leverage leverage to promote consumption, introducing more policies to boost demand, including expanding the scale and scope of the old-for-new consumption of consumer goods. Exports: With global inflation slowing next year, insufficient stocking power in the United States, and the impact of Trump's tariff increases, the pressure to stabilize foreign trade next year will be greater, with strong uncertainty in exports. Overall economic expectations: Next year's GDP growth is expected to be around 4.5%-5%. Fundamental outlook: Overall calculation of listed banks' 25E revenue -3.2%, net profit +1.2%, benefiting from the leading role played by high-quality city commercial banks in certain regions, city commercial banks are still the best performing sector in terms of earnings growth. Quantity: It is expected that the 25E stock social finance growth rate will be around 8.1%, mainly driven by the incremental government bonds; the credit growth rate is expected to decrease to around 7.1%. Price: It is calculated that the 25E interest rate spread will decrease by 17bp year-on-year, of which the policy impact on existing stocks accounts for 13.9bp + the further decrease of 25bp in the 5-year LPR and the 20bp decline in time deposits affect 3bp. The main pressure still comes from the first quarter, and the subsequent reduction will gradually narrow. Fees: With a low base + new momentum, the fee growth rate in 25 remains stable. Other non-interest income: Expected growth rate decrease but controllable. Asset quality: Generally stable, with differentiation in specific categories. Review and outlook of the sector's market trends. Insights from market reviews - rotation of core assets, location advantages, and high dividends. Since 2008, the banking sector has experienced four style shifts: the era of joint-stock banks (2009-2015), the era of core assets (2016-mid-2021), the era of location advantages (mid-2021-late 2022), the era of high dividends (2023-present). Future outlook: How will future trends unfold based on historical reviews. The current environment corresponds to the end of 2012, 2018, or 2022, so the trend in 2025 can refer to 2013, 2019, or 2023. Conclusion: High dividend strategy in the first half of the year, watch policy developments in the second half. Risk warning: Economic downturn exceeds expectations; the risk of dilution of dividend yield due to refinancing; risks of deviation in industry data calculations; risks of insufficient sample statistics leading to deviations from actual conditions; risks of using public information in research reports that may be outdated or not updated in a timely manner.