Why is Changjiang Securities watching lagging bank stocks?

  • Ma Xiangyun of Changjiang Securities believes bank stocks remain in a process of low-valuation recovery and dividend-value reassessment this year. Following a rebalancing of investment styles in the second half and further record highs among core bank stocks, he is optimistic about Chongqing Rural Commercial Bank, China Merchants Bank and Bank of Nanjing, whose gains have lagged.
  • The three banks share the appeal of relative valuation or dividend advantages, but their recovery cases differ: Chongqing Rural Commercial Bank depends on stabilizing earnings and return on equity; China Merchants Bank on a narrowing dividend-yield spread; and Bank of Nanjing on regional credit growth and shareholder stake increases.
  • The report warns that persistently weak actual financing demand across the economy and mounting economic pressure are risks to the outlook for bank stocks.

What could drive a recovery in each of the three lagging banks?

  • Over the past two years, Chongqing Rural Commercial Bank has used corporate lending to expand its assets toward 2 trillion yuan, primarily lending to infrastructure and manufacturing. Changjiang Securities expects that, as the reduction of high-yield retail loans gradually runs its course and large corporate exposures are cleared, the net interest margin could stabilize and recover, helping stabilize earnings growth and return on equity; the brokerage also values its capital strength and dividend advantage.
  • China Merchants Bank’s gains in the current cycle have lagged those of the large banks, partly because of its historically higher valuation and a weak retail market. At the end of June 2026, the spread between its A-share dividend yield and those of the four largest banks widened to 153 basis points; Changjiang Securities believes the dividend allocation window from the fourth quarter to the start of the year and the interim dividend to be paid in 1–February of the following year could support a valuation recovery.
  • Bank of Nanjing’s share performance this year and price-to-book ratio have lagged those of some leading city commercial banks. Changjiang Securities expects strong credit issuance in Jiangsu to support continued double-digit loan growth, while improvements in the interest paid rate and expense ratio will help stabilize margins and earnings; its dividend yield for 2026 is 4.98%, and major shareholder Jiangsu Communications Holding continues to increase its stake.

What supports Bank of Suzhou’s growth?

  • Dai Zhifeng of Zhongtai Securities believes Bank of Suzhou has deep roots in a major manufacturing city, with its corporate lending aligned with the regional economy. Revenue and net profit attributable to shareholders rose 13.9% and 8.1% year on year, respectively, in the first three quarters of 2026, below the first-half rates of 14.5% and 8.5%; third-quarter growth was 12.6% and 7.3%, respectively.
  • Double-digit expansion in both assets and liabilities supported interest income: net interest income rose 22.7% year on year in the first three quarters, slowing from 23.9% in the first half, while third-quarter growth was 20.4%.
  • Despite balance sheet growth, margins remain under pressure. The estimated annualized net interest margin for the third quarter was 1.45%, down 3 basis points quarter on quarter; the yield on interest-earning assets fell 6 basis points and the cost rate of interest-bearing liabilities fell 2 basis points.

What are Bank of Suzhou’s asset quality and earnings prospects?

  • The non-performing loan ratio was 0.81% at the end of the third quarter, down 0.1 basis points quarter on quarter; however, special-mention and non-performing loans together accounted for 1.76%, up 4 basis points. The cumulative annualized net formation rate of non-performing loans for the first three quarters was 0.73%, up 7 basis points year on year but still well below the peer average.
  • The provision coverage ratio and provision-to-loan ratio were 370.73% and 3.02%, respectively, and Zhongtai Securities considers the provision buffer still ample. The brokerage forecasts that Bank of Suzhou’s net profit attributable to shareholders will rise 9.11% year on year in 2026, corresponding to a price-to-book ratio of 0.77 times; the share price used for the valuation is as of the close on 28 October 2026.