CITIC SEC: The banking sector returns to the fundamental framework, focusing on absolute return opportunities.

CITIC SEC released a research report stating that the factors that exceeded expectations during the Spring Festival have already been reflected in the post-holiday market performance. It is expected that starting next week, the market may reassess the potential policy, economic, and industry changes that exceed expectations. In this context, bank stock investments are returning to a logic based on fundamental frameworks. The reevaluation of business models is the core contradiction of bank stock investments in the first half of 2025, and it is recommended to focus on absolute return opportunities based on industry valuation upside. In addition, the difference between dividend yield and risk-free return rate has widened, implying an increased potential allocation power for bank stocks. Key points from CITIC SEC: - Banks with disclosed performance have maintained stable operational capabilities, implying a stable industry fundamental landscape. - Asset quality remains stable. - Profit growth of city commercial banks in high-wealth regions remains positive. - Post-holiday monetary conditions are easing marginally, leading to an increase in the attractiveness of dividend yields. Event: As of February 9, 2025, 13 listed banks have released performance reports; the monetary market liquidity has eased slightly after the Spring Festival holiday. In conclusion, the report suggests that market reevaluation of potential policy, economic, and industry changes is expected to occur in the coming weeks, with a focus on absolute return opportunities based on fundamental logic of sectors. It also emphasizes the importance of returning to a fundamental investment logic and the potential valuation increase due to reevaluation of business models. Additionally, it highlights the risk factors related to macroeconomic conditions, bank asset quality deterioration, unexpected regulatory and industry policy changes, and lower-than-expected execution of company development strategies.