Guotou Securities: It is expected that the growth rate of listed banks' performance will slightly rebound in 2026. The revaluation of domestic banks' value is not over yet.

Guotou Securities released a research report stating that it is expected the performance growth rate of listed banks in 2026 will slightly rebound. The People's Bank of China is downplaying its focus on quantitative targets, and the slowdown in credit growth will continue. Financial investment growth is better than credit growth, and in the context of overall weakening, structure will be more important. Regions that can sustain leverage and banks that can steadily increase credit market share will benefit more. Currently, the banking industry is operating steadily, and the fundamentals are expected to mildly improve. Compared globally, domestic bank valuations are still low, and combined with the fact that institutional holdings are low, the path for the central valuation of banks to rise has not yet been fully realized. It is expected that the valuations of Hong Kong-listed banks will also continue to converge towards the A-share bank sector. Key points from Guotou Securities: 1. The performance growth rate of listed banks in 2026 will slightly rebound. The People's Bank of China is downplaying its focus on quantitative targets, and the slowdown in credit growth will continue. Financial investment growth is better than credit growth, and in the context of overall weakening, structure will be more important. Regions that can sustain leverage and banks that can steadily increase credit market share will benefit more. 2. The asset-side yield will continue to decline, but the rate of decrease will gradually slow down. With high-interest deposits coming up for repricing, the positive effect of deposit repricing lowering liability costs in 2026 may outweigh the negative effect of asset-side yield decline, providing relatively good support for interest spreads. 3. Increased volatility in the bond market will disrupt bank revenues, favoring banks with a lower proportion of trading bond business and thicker unrealized gains on bonds. 4. The asset quality of corporate loans continues to improve, with slight fluctuations in risks related to real estate loans to corporates having minimal impact on bank asset quality. Retail loan asset quality continues to be under pressure due to structural contradictions, but considering that the risk transmission of retail loans to individual subjects is much smaller than that of corporate loans, the rise in retail loan risks is gradual and relatively moderate, with more of a structural impact on the financial system. Bank stocks are not defensive but rather undervalued. Investors often see bank stocks as defensive investments, especially in state-owned large banks, but they overlook the potential for value reassessment due to deviations between valuation and fair value. The current banking industry is stable, with the fundamentals expected to gradually improve. Valuations of domestic banks are still low compared to global standards, and with low institutional holdings, the path for the central valuation of banks to rise has not been completed. It is expected that the valuations of Hong Kong-listed banks will continue to converge towards A-share bank stocks. Risk warning: Policy implementation may fall short of expectations, overseas demand may decline beyond expectations, and retail loan risks may be widely exposed.