Outperforming the Nasdaq, bank stocks encounter "bull turning". Is it "a surefire profit"?

Not long ago, the stock prices of Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, and China Construction Bank all hit new historical highs. When we take a closer look over a slightly longer period of time, we will make an even more astonishing discovery - in the past year, the CSI Bank Index has outperformed the Nasdaq 100 Index. Some people in the market also refer to bank stocks as the "Yinsdaq" or the "Chinese version of Nasdaq". But does this mean that the bank sector is a "surefire profit" for investors? The answer is no. One must admit the fact that there is still considerable pressure on the operational side of banks, which is another concern for the market regarding the bank sector. At the end of April, 42 A-share listed banks collectively released their first quarter financial reports for 2025. From these reports, it can be seen that the downward trend in net interest margins for banks in the first quarter of 2025 has not yet reversed, posing a certain test and challenge for the future operations of many banks. Among the 42 listed banks, 26 banks saw growth in operating income, 30 banks saw growth in net profits. However, 10 banks experienced a decline in both operating income and net profits, showing a certain level of pressure on their operations. Additionally, bank stocks are no longer as "cheap" as they used to be. For example, in July 2024, the average dividend yield of the 42 listed banks was as high as 4.9%, but as of July 7th this year, the dividend yield of listed bank stocks has fallen to 3.89%. Although the dividend yield is still higher than that of wealth management products, it is no longer as attractive to invest in as it was last year. "Nowadays, bank stocks are neither expensive nor cheap," warned Chen Xin, Professor at the Dingshuihu Advanced Finance Academy of Shanghai University of Finance and Economics, and Director of the Capital Market Research Center. Investors need to be wary of the short-term speculative risks driven by market sentiment, and they should comprehensively evaluate whether the valuation of bank stocks is reasonable based on operating conditions and the overall economic environment, in order to avoid chasing high entry points in an overheated market.