UBS: Inner silver shares are expected to become positive catalysts for first-quarter performance. First choice is ICBC, ABC, BOC and Ping An H shares.

UBS released a research report stating that the domestic bank stocks will start to announce their first quarter performance on Monday (20th), and it is expected that the performance will become a positive catalyst, especially for the four major state-owned banks benefiting from further revenue improvement; while the joint-stock commercial banks may see differentiation. Overall, the core profit growth rate of national banks in the first quarter of this year is expected to accelerate to 3.5% (compared to a 2.2% increase in the fourth quarter of last year), revenue growth rate to rise 3.8% (compared to a 2.4% increase in the fourth quarter of last year), pre-provision operating profit (PPOP) to increase by 4.8% (compared to a 2% increase in the fourth quarter of last year); however, net profit growth rate is relatively moderate, increasing by 1.2% (compared to a 2.4% increase in the fourth quarter of last year), mainly due to increased provisions. In terms of revenue drivers, the bank expects the net interest margin of domestic bank stocks to remain stable on a quarterly basis, despite facing pressure from the repricing of housing loans. The year-on-year growth of new loans is basically flat, indicating a slight slowdown in growth, but net interest income will still maintain positive growth (+3.3%, compared to a 1% increase in the fourth quarter of last year). Meanwhile, improvement in fee income and cost control will support the increase in PPOP growth rate. In comparison, net profit growth rate may lag behind revenue and PPOP, reflecting that retail unsecured loans and real estate risks remain high, and banks need to increase provisions to cope with potential asset quality pressures. In addition, the details of capital injection plans for Agricultural Bank Of China (01288) and China Industrial and Commercial Bank of China (01398) are yet to be announced, with the pricing per share and fundraising size being crucial. Investor focus may be on the following areas: trends in net interest margin, benefiting from the decline in deposit costs and the low base in the fourth quarter of last year, BANKCOMM (03328), China Construction Bank Corporation (00939), Ping An Bank (000001.SZ), and China Minsheng Banking Corp., Ltd. (01988) are expected to see a widening of net interest margins on a quarterly basis. Fee income growth rate, bond trading income strength, and new non-performing loan situations. UBS stated that the fundamentals of domestic banks continue to improve, and it is expected that Bank Of China (03988), Bank of Communications, Ping An Bank, CITIC BANK (00998) will outperform their peers in the late April earnings season; Industrial Bank (601166.SH), China Minsheng Banking Corp., Ltd. may lag behind. Since the beginning of the year, Bank Of China's stock has outperformed the MSCI China Index by 11%, particularly standing out in March amid rising geopolitical risks. Last year's performance showed improvement in fundamentals, further supporting the stock price. Looking ahead, amidst geopolitical uncertainties, weak real estate market, Renminbi appreciation, and export risks, the bank still favors defensive banks. The dividend yield of H-share banks is still above 5%, and the improvement in fundamentals will continue to support stock prices. The preferred targets for the next 12 months are CITIC BANK H shares, Bank of China H shares, China Construction Bank H shares, and Industrial and Commercial Bank of China H shares.