On August 24, all major A-share indices closed lower, with the seesaw effect between sectors reappearing as banking stocks climbed against the market trend, ranking second in gains among the 31 Shenwan primary industries for the day. Among them, CITIC Bank, a leading joint-stock bank with a total market capitalization exceeding 400 billion yuan, saw its share price touch a new high of 8.63 yuan during trading, pushing its total market value to over 470 billion yuan. With the interim earnings reporting season in full swing, the future trajectory of banking stocks is drawing significant attention. Based on the performance of the 10 listed banks that have already released their interim reports or earnings previews, clear signals of stabilizing net interest margins and recovering revenue growth have emerged, though performance varies across institutions. Given heightened market volatility and frequent sector rotation, institutions remain optimistic about the fundamentals and investment prospects of banking stocks, and anticipate that allocation demand from insurance funds and other institutional investors will continue to intensify. However, institutions also broadly caution investors to pay attention to inter-institution divergence and structural opportunities. At present, compared with joint-stock banks, state-owned major banks and high-quality regional banks remain the preferred focus areas.

Banking Stocks Rise Against the Trend, CITIC Bank Hits New High

On August 24, all major A-share indices declined collectively. The Shanghai Composite Index fell 0.59% to close at 3,882.01 points, the Shenzhen Component Index dropped 2.13%, the ChiNext Index slid 3.21%, the Beijing Stock Exchange 50 Index lost 2.02%, and the STAR 50 Index declined 3.1%. More than 3,900 stocks across the market closed lower. In terms of sector performance, the seesaw dynamic between technology and dividend-yielding assets reappeared: AI hardware and technology stocks plunged sharply, with CPU, optical communications, and computing chip concepts suffering heavy losses. The combined market value of the "Yi Zhong Tian" trio fell by more than 150 billion yuan in a single day, while the pharmaceutical and biological sector also dropped over 3%. In contrast, sectors such as coal, banking, food and beverage, and non-bank financials led the gains.

By the close, the CSI Bank Index rose 1.33%. Apart from Bank of Ningbo, which edged down slightly, all other 41 constituent stocks closed in positive territory, with 35 stocks gaining more than 1% and 6 stocks rising over 2%. Overall, the top gainers were mainly regional banks and joint-stock banks, with Chongqing Rural Commercial Bank (up 3.378%), Wuxi Bank (up 2.79%), and Xiamen Bank (up 2.49%) leading the advance.

On the same day, several banking stocks hit record highs. By the close, CITIC Bank rose 2.03% to 8.56 yuan per share, with a total market value of 452 billion yuan. During trading, its share price touched a high of 8.63 yuan, corresponding to a market value exceeding 470 billion yuan. Looking back, since the start of August, CITIC Bank's A-share price has accumulated a gain of 9.46%, leading all 42 listed banks. In just the 11 trading days since August 10, it has surged 14.75%, outperforming the sector by 10 percentage points and ranking first again. Compared with the beginning of the month, CITIC Bank's total market value has grown by approximately 33.6 billion yuan in August.

Regional banks such as Bank of Jiangsu and Qilu Bank have also been climbing steadily to new highs. By the close, Bank of Jiangsu rose 1.59% to 12.13 yuan, corresponding to a total market value of 222.6 billion yuan. Qilu Bank closed at 6.56 yuan, touching an intraday high of 6.6 yuan, with a closing market value of 40.4 billion yuan. Both banks have accumulated gains of nearly 15% since the beginning of July.

On the news front, as of that day, eight listed banks, including Ping An Bank, Bank of Nanjing, Bank of Ningbo, Bank of Jiangsu, Jiangyin Bank, Bank of Chongqing, Bank of Guiyang, and Ruifeng Bank, had disclosed their semi-annual performance reports for 2026, while Shanghai Pudong Development Bank and Chongqing Rural Commercial Bank released earnings previews, collectively signaling a stabilizing performance trend. Among them, except for Ruifeng Bank, which saw a decline in revenue, the other nine banks all achieved positive revenue growth. Compared with the same period last year, except for Jiangyin Bank and Ruifeng Bank, the remaining eight banks saw improvements in their first-half revenue growth rates to varying degrees. In the first half of this year, Bank of Ningbo (up 11.54%), Bank of Nanjing (up 10.94%), Bank of Guiyang (up 10.87%), and Bank of Chongqing (up 10.79%) achieved double-digit revenue growth, although Bank of Guiyang's net profit attributable to shareholders continued to decline year-on-year. In terms of profitability, Bank of Ningbo currently leads with a 12.11% growth rate in net profit attributable to shareholders, an improvement of nearly 4 percentage points compared with the same period last year. Bank of Chongqing's net profit attributable to shareholders also grew by 10.29%, followed by Bank of Nanjing and Bank of Jiangsu with growth rates of 8.17% and 8.09%, respectively. Wind data shows that most banks will release their first-half financial reports this week, with Wednesday through Friday marking the peak disclosure period.

Signs of Stabilizing Net Interest Margins, What's the Outlook for Dividend Value?

Regarding bank performance, one of the most closely watched indicators is undoubtedly the net interest margin. According to data recently released by the National Financial Regulatory Administration, the banking sector's net interest margin edged up 0.01 percentage points quarter-on-quarter to 1.41% in the second quarter. This marks the first quarterly sequential increase in four years for this indicator, which the market interprets as a significant signal of stabilizing performance. Specifically, in the second quarter of this year, the net interest margin for joint-stock banks stood at 1.54%, flat compared with the first quarter. During the same period, the net interest margins for state-owned major banks, city commercial banks, private banks, and rural commercial banks were 1.31%, 1.4%, 3.63%, and 1.59%, respectively, up 0.02, 0.02, 0.01, and 0.01 percentage points from the first quarter.

Looking at the listed banks with comparable data, a report from Guotai Haitong suggests that driven by improvements in liability costs, most banks' net interest margin trends are stabilizing, with net interest income showing strong resilience. Specifically, Jiangyin Bank and Ping An Bank improved their net interest margins by 3 basis points and 1 basis point, respectively, compared with the first quarter. Bank of Chongqing's net interest margin rebounded by 7 basis points from 2025. The net interest margins of Bank of Ningbo, Bank of Jiangsu, and Bank of Nanjing declined by 3 to 9 basis points year-on-year. Four city commercial banks saw their first-half net interest income grow by more than 10% year-on-year, with Bank of Nanjing surging over 40% and continuing its strong growth momentum. Bank of Chongqing and Bank of Jiangsu grew by 26% and 12% year-on-year, respectively, with growth rates improving by 13.2 percentage points and 4.7 percentage points compared with the first quarter. However, non-interest income performance diverged, with Bank of Ningbo's fee-based income growing nearly 54% year-on-year in the first half, while Bank of Nanjing's fee-based income declined 18.5% year-on-year.

Asset quality pressure remains a market concern. Data from the National Financial Regulatory Administration shows that the banking sector's non-performing loan ratio edged up 0.01 percentage points quarter-on-quarter to 1.52% in the second quarter. Among them, the NPL ratios for state-owned banks, joint-stock banks, city commercial banks, and rural commercial banks were 1.21%, 1.23%, 1.87%, and 2.83%, respectively. Except for state-owned banks, where the NPL ratio declined slightly from the end of the first quarter, the ratios for joint-stock banks, city commercial banks, and rural commercial banks rose to varying degrees quarter-on-quarter. However, among the aforementioned banks, most saw their NPL ratios remain flat or decline slightly, with provisions remaining stable.

In the view of Dai Zhifeng, director of the research institute and banking analyst at Zhongtai Securities, the "dividend value" of banking stocks is prominent, but he advises focusing on state-owned major banks with cost advantages in funding and high-quality regional city and rural commercial banks. "During the three phases of market decline in 2015-2016, 2018-2019, and 2021-2024, banking stocks were relatively resilient, with declines significantly smaller than the CSI 300. The individual stocks that held up well were still quality banks with earnings support. During bull markets, although the sector as a whole may underperform the broader market, stocks with alpha within the sector can outperform the market with significant excess returns. In terms of capital positioning, the reduction of holdings by the China Securities Finance Corporation is nearing its end, and the scale of broad-based index funds has fallen back to pre-2024 'rescue' levels, meaning the disturbance from state-affiliated institutional funds has largely been eliminated. In the short term, there is a seesaw effect with the technology sector, but long-term pricing still revolves around ROE and dividends."

Notably, the National Financial Regulatory Administration recently released the Measures for the Management of Assets and Liabilities of Insurance Companies (hereinafter referred to as the "Measures"). For life insurance companies, the new rules require that the comprehensive investment return coverage ratio and net investment return coverage ratio cover the cost of liabilities and the guaranteed cost of liabilities, respectively. The Measures will take effect on January 1, 2027, and allow a three-year transition period for insurance companies that do not yet meet the regulatory indicators. Wang Xianshuang, chief banking analyst at Guolian Minsheng Securities, predicts that these requirements will prompt insurance companies to continue increasing their allocation to high-dividend stocks, with banking and non-bank financial sectors expected to be the primary beneficiaries. "The most significant change with marginal impact on financial markets in the Measures is the requirement that life insurance companies' net investment return coverage ratio be no less than 100%, meaning the average net investment return over the past three years must cover the guaranteed cost of liabilities. Against the backdrop of declining long-term interest rates, insurance companies are expected to increase their allocation to high-dividend stocks, represented by banks, in order to meet regulatory requirements," he said.