Lyon: It is expected that the net interest margin of banks will decrease significantly within the year, supporting profit recovery. Overall, target prices are being raised.

Lyon releases research report, stating that the downward trend in revenue for the domestic banking industry since 2023 is now in the past. Based on positive signs in net interest spread and wealth management fees in the fourth quarter of last year, the bank expects a significant narrowing of the decline in net interest spread this year, and a stabilization on a quarterly basis from the second half of the year. With the recovery in fee income, this should support pre-provision profits in the domestic banking industry to return to normal low to mid-single digit growth. The bank believes that moderate revenue growth and stable dividend payouts will become the new normal for the industry. They have raised the target price of Bank Of China (03988) from HKD 3.9 to HKD 6.7, China Construction Bank Corporation (00939) from HKD 10.4 to HKD 10.9, BANKCOMM (03328) H shares from HKD 9.2 to HKD 9.3, and Industrial and Commercial Bank of China (01398) from HKD 5.2 to HKD 7.5, all with an "outperform market" rating. At the same time, Lyon has lowered the target price of Postal Savings Bank Of China (01658) from HKD 6.7 to HKD 6.3, maintaining an "outperform market" rating, and BANKCOMM (601328.SH) A shares from RMB 9.4 to RMB 9.3, and Ping An Bank (000001.SZ) target price from RMB 13 to RMB 12.7. All of these stocks have been given an "outperform market" rating. The top pick is China Merchants Bank (03968), with a target price of HKD 70 and an "outperform market" rating, as well as Bank of China and China Construction Bank.