Zhongtai: The dividend attributes of bank stocks are highlighted under the background of "equivalent tariffs".

Zhongtai released a research report stating that the impact of "equal tariffs" on the total economic output and structure of China is profound. It analyzed the impact mechanism of "equal tariffs" on the banking industry in China, overall, it brings additional pressure on banks' loan demand and net interest margin, while asset quality can remain stable; the impact on the banking industry is manageable. Against the background of "equal tariffs," the dividend attributes of bank stocks are highlighted, and it is recommended to pay attention to the investment value of bank stocks, focusing on large banks, CMB, and high-quality city commercial banks. The main points of Zhongtai are as follows: Impact mechanism of "equal tariffs" on China's banking industry: 1. Economic impact mechanism: Weakening external demand puts pressure on export-related enterprises' operations, credit demand, loan rates, and asset quality of banking related client groups face pressure; different client groups have significant differences. 2. Policy impact mechanism: Loose monetary policy may stimulate retail credit demand, reserve requirement cuts and interest rate reductions lower banks' funding costs. 3. Investment impact mechanism: The dividend value of the banking sector is enhanced, which helps with capital replenishment. Impact of "equal tariffs" on China's credit demand: Overall pressure increases, client demand differentiates. 1. Economic pressure increases, loan demand declines. The past credit growth rate generally matches with the nominal GDP growth rate, a 1 percentage point decline in GDP growth corresponds to a 1 percentage point decline in credit growth, leading to a reduction of credit expansion by 2.6 trillion yuan. 2. Decrease in demand from export-related client groups: In a pessimistic scenario, the credit expansion in 2025 faces a shortfall of 213.9 billion yuan, accounting for about 1.2% of the total new loans for the year. 3. Consumer-related client groups and enterprises may receive support: 2024, new consumer loans amounted to 1.24 trillion yuan, accounting for 6.9% of the total new loans for the year. Impact of "equal tariffs" on China's net interest margin: Increases additional pressure, manageable in the medium to long term. 1. Decreased demand brings pressure on loan rates, a 1 percentage point decline in credit growth may lead to a 14 basis point decrease in net interest margin. A credit shortfall from export-related client groups creates pressure on net interest margin; while the retail sector supports the net interest margin. 2. Changes in monetary policy reduce funding costs. 3. In the medium to long term, the net interest margin of banks is close to the bottom. With a 5% asset growth rate and stable asset quality, the medium to long-term bottom line of the net interest margin is about 1.24%, and the current industry net interest margin is close to the bottom. Impact of "equal tariffs" on the asset quality of China: The pressure is not significant, and it can remain stable. 1. Export-related client groups: The manufacturing and individual businesses are directly affected by tariffs, with listed banks' manufacturing and individual business loans accounting for a total of 17.7%, and with export to the US accounting for 14.7%, the maximum exposure in the related areas is 2.6%. 2. Other risk client groups: Real estate: the period of greatest pressure has passed, the future depends on the banks' self-exposure and disposal pace; local government financing vehicles eliminate risks through debt conversion: hierarchical improvement, pressure relief, using time to change the situation; Retail: under policy support, the trend of non-performing loans is expected to improve. 3. Medium to long-term stability continues: most client groups of banks have policy support (national credit), and asset quality pressure is not significant. Investment advice: Dividend attributes are highlighted, pay attention to the investment value of bank stocks. Against the background of "equal tariffs," the dividend attributes of bank stocks are highlighted, and it is recommended to actively focus on the investment value of bank stocks, focusing on large banks, CMB, and high-quality city commercial banks. The trend of rising yields on government bonds in the first quarter is facing marginal changes, and the high dividend ratio of the banking sector is improving the cost-effectiveness. Two investment themes: one is large banks with high dividends: the six major banks (such as ABC, CCB, and ICBC) and China Merchants Bank; the other is City Commercial banks with location advantages and strong certainty: Bank Of Jiangsu, Bank Of Nanjing, Bank Of Chengdu, Chongqing Rural Commercial Bank, Shanghai Rural Commercial Bank, Qilu Bank Co., Ltd., etc.