Ten Thousand Securities: High Dividend Style Still Has Cyclical Opportunities Banking Sector Still Has Allocation Value

Wanlian Securities released a research report stating that foreign policies are leaning towards being more lenient, with the United States expected to begin another round of interest rate cuts in September 2025, which will benefit the global flow of capital. On the domestic front, in 2026, policies aimed at promoting stable growth through the synergy of monetary and fiscal measures are expected to be further strengthened, and the loose liquidity environment is expected to continue. The high dividend style still presents opportunities in certain stages. Taking into consideration the current dividend yield and valuation levels of bank stocks, the bank believes that the banking sector still holds value in terms of allocation. Key points from Wanlian Securities: - Improvement in net profit growth for the first three quarters of 2025 - As of the first three quarters of 2025, the operating income growth rate of 42 listed banks increased by 0.91% year-on-year, while the net profit growth rate was 1.48%. Despite a slight fluctuation in overall revenue growth due to the impact of bond market volatility on non-interest income, the banking sector achieved positive growth overall, benefiting from a narrowing in the decline of net interest income and marked improvement in intermediate income. - On the cost side, operating and management expenses increased by 0.34% year-on-year, credit impairment losses increased by -1.9%, and income tax increased by 3.9%. Operating and management expenses increased at a lower rate than revenue, and provisions continued to support profits. However, the decrease in the provision level has led to a decrease in profit release. The total assets of listed banks increased by 9.3% year-on-year in the first three quarters of 2025, maintaining a high level of expansion. - The bank estimates that the net interest margin of listed banks in the first three quarters of 2025 is approximately 1.33%, a year-on-year decrease of about 12 basis points, showing a narrowing trend in the decline of the net interest margin. As of the end of the third quarter of 2025, the non-performing loan ratio of listed banks was 1.21%, a decrease of 2 basis points quarter-on-quarter, and overall asset quality remained stable. The average provision coverage ratio was 283.17%, a decrease of about 4.11 percentage points quarter-on-quarter; the loan-to-provision ratio was 3.03%, a decrease of 5 basis points quarter-on-quarter. - Moderate reinforcement of overall policies expected in 2026 - The bank expects that under the backdrop of deepening external environmental changes and the prominent contradiction between strong supply and weak demand in the domestic market, overall policies in 2026 may be moderately reinforced, with a slight increase in the general fiscal deficit. The bank forecasts that overall financing demand in 2026 will see a phase of recovery. In addition, expanding domestic demand in 2026 is the top priority, with continued moderate fiscal reinforcement and deepening efforts at the enterprise level to regulate "overlapping" competition. The bank expects a temporary easing of the contradiction between strong supply and weak demand domestically, with prices expected to stabilize further. - Steady performance of the sector expected in 2026 - The overall growth rate of the banking sector in 2026 may slightly decrease; considering the current market interest rate level and policy adjustment expectations, the net interest margin is expected to stabilize; with the expectation of slightly slower growth in scale and stabilization of net interest margin, net interest income growth is expected to rebound. In terms of intermediate income, it may benefit from the continuous recovery in wealth management services and the increase in settlement demand after the overall economic recovery, maintaining positive growth. Non-interest income may still be influenced by the bond market and may experience fluctuations. Overall asset quality remains stable, with current credit costs already at a low level, and the bank expects future provisions to contribute less to performance. In summary, the bank predicts a rebound in overall revenue in 2026, with the contribution of provisions to performance decreasing, leading to profit growth aligning closer to revenue growth.