Open Source Securities: Stable Dividend Base + Banking Industry Valuation Recovery Amid Recovery Expectations

Open source Securities released a research report stating that dividends are solid and sustainable, with stable growth driving the cyclical trend. In the face of tariff disturbances, the main focus is on policy determination, with room for reserve ratio cut and interest rate cut, and optimism about the valuation repair of banks under the stable growth policy. The bank predicts that the bank's performance will be basically stable in 2025, with revenue and net profit growth steadily rising. It continues to favor the sustainability of stable dividend strategies, recommending CITIC BANK and beneficiaries such as Agricultural Bank Of China, China Merchants Bank, Bank Of Beijing; as well as recommending Bank Of Suzhou as a cyclical target and beneficiaries such as Bank Of Jiangsu, Bank Of Chengdu, and Jiangsu Changshu Rural Commercial Bank. The main points of the open source securities are as follows: Overview of listed banks' performance in 2025Q1: Performance is generally under slight pressure, with revenue generally declining, while some city and rural commercial banks maintain relatively high growth rates. Looking at the first quarter report, the revenue and net profit growth rates of listed banks are under marginal pressure in 2025Q1. The yoy revenue of listed banks in 2025Q1 is -1.72% (2024A is +0.08%), and yoy net profit attributable to mother is -1.20% (2024A is +2.35%), both under slight pressure. Among them, the yoy revenue of state-owned banks/joint-stock banks/city commercial banks/rural commercial banks is -1.51%/-3.91%/+2.96%/+0.21% respectively, and the yoy net profit attributable to mother is -2.90%/-2.05%/+5.49%/+4.77%. Performance attribution: Dragged down by interest margin, with non-interest and provisions providing support. In terms of income structure, "quantity-price balance" is a major theme, with the net interest income growth rate of banks other than state-owned banks marginally improving; overall fee income is still relatively weak, and sales of wealth management products are growing; in terms of other non-interest income, the contribution of financial investment performance increased in 2024, but in 2025Q1 it was affected by the bond market, smoothing the performance to a certain extent by disposing of stock assets and realizing floating profits. In 2025, the "quantity-price balance" of the banking industry will still be a major challenge, and it is expected that the continued decline in liability costs will support net interest margins. Liabilities: The effect of rectifying high-interest deposits has become apparent, with the interest rate paid by listed banks in 2024 falling to 1.98%. In 2025, there are few opportunities for arbitrage on high-interest deposits, and due to the pressure on interest margins, asset-side rate cuts objectively also require the support of liability costs. In 2025, there will still be a high proportion of fixed deposits repricing at maturity, and it is expected that liability costs will further decrease. Assets: The sustainability of credit deserves attention, and as of 2025Q1, there are still signs of momentum in credit lending. The gap between loan and investment yields narrowed to 69 BP in 2024, down 24 BP from 2023. In an operating environment with rigid liability costs and low interest rates + low interest margins, the bank expects listed banks to continue to accelerate the realization of investment returns on existing assets. Bank asset quality in 2024 & 2025Q1: Improvement in corporate trends, retail rebounding, and overall low credit costs The non-performing loan ratio of listed banks in 2025Q1 is 1.23%, down 1bp from the end of 2024; broken down by bank type, the non-performing loan ratio of rural commercial banks remained flat, while those of state-owned banks, joint-stock banks, and city commercial banks all decreased by 1bp. The corporate non-performing loan ratio in 2024 decreased to 1.32%, improving by 20 BP compared to 2023, with a significant decrease in real estate non-performing loan ratio; the retail non-performing loan ratio was 1.13%, up 25bp from 2023 and has been increasing for three consecutive years since 2021. In 2024, the credit cost of listed banks was 0.65%, with state-owned banks at 0.50%, both at historical lows. In addition, from the perspective of provisioning for the release of performance, state-owned large banks have more solid foundations. Risk warning: Macroeconomic growth is lower than expected, policy implementation is lower than expected, etc.