Zheshang: Non-bank's interim performance continues to improve after 26 years, and securities firms have stronger resilience.

Zheshang released a research report stating that the performance of the non-bank financial sector in the first half of 2026 is expected to continue to improve, with insurance profits improving year-on-year and brokerage performance showing more prominent elasticity. The bank expects life insurance new business value (NBV) to maintain steady growth, with the securities industry's net profit expected to increase by approximately 51% year-on-year. Benefiting from active trading and a rebound in the equity market, the mid-year performance of the non-bank sector in the first half of 2026 shows a clear improving trend, with mid-year performance becoming the primary catalyst for valuation correction. In the medium to long term, the reallocation of household wealth, deepening capital market reforms, and the construction of a strong financial nation will all support the strategic allocation value of the non-bank sector. In terms of sector selection, the bank maintains a preference for brokerage firms over life insurance companies. Zheshang's main points are as follows: Outlook for the insurance industry's performance: NBV steady growth expected, investment returns improving (1) Life insurance: In the first half of 2026, the bank expects the average growth rate of NBV for major listed life insurance companies on the A-share market to remain in the double digits, but the growth rate may moderate due to a high base in the same period last year. The core drivers are threefold: 1) Growth in new single premiums is the main volume support, with the bank-insurance channel expected to further increase its contribution, pushing for high growth in new single premiums under the integration of banking and insurance; 2) Channel quality and effectiveness continue to improve, with individual insurance channels focusing on the proportion of high-quality manpower and improving per capita productivity, while the bank-insurance channel under the integration of banking and insurance continues to constrain cost outlays; 3) Product structure transformation continues, with insurers promoting products such as participating policies in a low-interest rate environment, diluting the rigid costs of new business liabilities. As major listed insurers expand their bank-insurance channels and offer more variable income products, the bank expects the growth rate differences between companies to converge compared to the first half of 2025. (2) Property insurance: In the first half of 2026, the bank expects the overall combined operating ratio (COR) of property insurance to continue to improve year-on-year. This is due to the relatively controllable impact of natural disasters, with total direct economic losses from natural disasters totalling RMB 25.309 billion in January-May 2026, an increase of 13.09% year-on-year; the integration of non-auto insurance channels across banking and insurance, which helps property insurers reduce channel costs and optimize business quality; and improvements in claims payment for new energy vehicles, with the burden of high claims ratios expected to ease as pricing models, repair data, risk control, and claims management improve. (3) Investments: On the fixed income side, the bank expects long-term interest rates to show a narrow fluctuation pattern in the first half of 2026, with limited returns from trading desks and declining coupon yields for newly acquired fixed income assets, leading to a slight decrease in insurers' net investment returns. On the equity side, as insurers increase their allocation to equities and with equity market performance in the first half of 2026 noticeably better than the same period last year (with the Shanghai and Shenzhen composite indexes rising by 7.55% and 3.16%, respectively, in the first half of 2026 compared to 0.03% and 2.76% in the first half of 2025), equity investments are expected to be the main source of investment income growth. This will drive up insurers' overall investment returns and ultimately repair insurers' net profits. Outlook for the securities industry's performance: Industry net profit expected to increase by approximately 51% year-on-year (1) Brokerage business: Market trading activity was significantly active in the first half of 2026, with the daily average trading volume of stocks in the Shanghai and Shenzhen markets reaching RMB 3.24 trillion, an increase of 101.0% year-on-year. Specifically, in the second quarter of 2026, the daily average trading volume of stocks in the Shanghai and Shenzhen markets reached RMB 3.35 trillion, up by 125.45% year-on-year and 7.31% compared to the previous quarter. The issuance of equity funds also rebounded, with the issuance of new equity funds reaching 492.3 billion shares in the first half of 2026, an increase of 88.33% year-on-year. The bank expects a significant increase in brokerage business revenue in the first half of 2026, up by 74.85% year-on-year. (2) Investment banking business: In the first half of 2026, regulatory policies supported the financing of high-quality technology companies, leading to a continued rebound in IPO activity. In the first half of the year, a total of RMB 70.574 billion was raised through IPOs, an increase of 88.93% year-on-year. However, the scale of funds raised through secondary offerings decreased due to a high base, with a total of RMB 385.030 billion raised in the first half of the year, down by 46.93% year-on-year. Bond underwriting maintained steady growth, with securities firms underwriting a total of RMB 8.57 trillion in bonds in the first half of the year, up by 14.45% year-on-year. Due to the decline in the scale of secondary offerings, the bank expects a slight decline in net revenue from investment banking business in the first half of 2026, down by 7.15% year-on-year. (3) Asset management business: Regarding brokerage asset management, with the impact of channel business pressure gradually dissipating, the bank expects the scale of brokerage asset management to continue to recover in the first half of 2026, with collective asset management and active management products becoming the main sources of incremental growth. Considering the decline in the proportion of low-fee channel business and the increase in excess returns due to improved equity market performance, the bank expects a slight increase in the overall management fee rate of brokerage asset management. In terms of public funds, as of the end of the first half of 2026, the size of public funds reached RMB 37.55 trillion by net asset value, down by 0.33% from the beginning of the year but up by 9.17% year-on-year. Due to reforms in public fund fees and the increase in the proportion of low-fee products such as ETFs, the bank expects the comprehensive management fee rate of public funds to continue to decline. The bank predicts a year-on-year increase of 22.12% in revenue from asset management business in the first half of 2026. (4) Credit business: Improved market trading activity and risk appetite have bolstered the demand for credit business. By the end of the first half of 2026, margin trading balances reached RMB 3.02 trillion, up by 18.88% from the beginning of the year and 63.22% year-on-year. However, the downward pressure from declining interest rates, customer price competition, and conservative business operations for stock pledges are expected to suppress interest spreads. The bank forecasts a year-on-year increase of 46.24% in net revenue from credit business. (5) Proprietary trading business: In the first half of 2026, with long-term interest rates fluctuating at low levels, the bank expects a slight decrease in the yield of fixed income investments. The Shanghai Composite Index and the Shenzhen Component Index rose by 3.16% and 7.55%, respectively, significantly outperforming their performance in the first half of 2025. This will provide significant support to the overall yield of proprietary investments. The bank forecasts a 45.00% year-on-year increase in revenue from proprietary trading business in the first half of 2026. (6) Performance outlook: With significant increases in trading volumes, improvements in equity market performance, and major contributions from brokerage, credit, and proprietary trading businesses, the bank predicts a 45.19% year-on-year increase in operating revenue for the securities industry in the first half of 2026. In terms of net profit, considering the increased proportion of high-profit margin businesses such as proprietary investments and cost savings from digitization transformation, the overall net profit margin is expected to improve. The bank forecasts a 50.95% year-on-year increase in net profit for the securities industry in the first half of 2026. Risk factors Risks include macroeconomic recovery falling short of expectations, significant volatility in the equity market, continued decline in long-term interest rates, and unexpected changes in regulatory policies.