Financial stocks, which had been overlooked for some time, staged a powerful rebound in the afternoon of June 22nd, with sectors like insurance and securities collectively surging, and many stocks hitting their daily limit-up.
The banking sector opened lower and touched a new low for the year that day before quickly reversing to climb. By market close, over half of bank stocks were in positive territory, with the CSI Bank Index rising 0.77%.
However, looking at individual stock performance, the divergence among bank stocks has intensified this year. Regional banks, represented by Bank of Qingdao and Bank of Chengdu, led the gains, while national banks like Shanghai Pudong Development Bank (SPD Bank) and Agricultural Bank of China (ABC) were among the worst performers. It is noteworthy that June and July are peak periods for bank dividend payouts. Many institutions have pointed out that as share prices have pulled back, the attractiveness of current bank dividend yields is gradually becoming more prominent.
Over Half of Bank Stocks Close Higher
The market saw a volatile rebound on Monday, with heavyweight stocks, particularly financials, showing strength. The combined turnover for the Shanghai and Shenzhen exchanges reached 3.74 trillion yuan. The large financial sector surged, with stocks like GF Securities, Changjiang Securities, China Securities (CSC), and New China Life Insurance hitting the daily limit-up.
The banking sector performed weakly in the early session, with the CSI Bank Index briefly touching 6875.89 points, its lowest level since April of last year, before turning positive and rising. By the close, the CSI Bank Index was up 0.77%. Twenty-eight constituent stocks closed higher, led by Bank of China (BOC), Industrial Bank, and Bank of Shanghai, which gained over 2%. Twelve stocks declined, with Bank of Chengdu, Bank of Changshu, and Qilu Bank among the biggest losers.
Looking back to before the Dragon Boat Festival holiday, the CSI Bank Index fell 6% in just four trading sessions, while the broader market rose 1.46% over the same period. Taking a longer view, the CSI Bank Index has declined 7.71% year-to-date, contrasting with a nearly 5% rise in the Shanghai Composite Index. This stands in stark contrast to last year when bank stocks frequently rallied.
Amid the ongoing sector correction, divergence among individual stocks has intensified. With the exception of China Construction Bank (CCB) and Bank of China (BOC), most of the state-owned major banks that shone earlier have been overtaken by regional city and rural commercial banks. Joint-stock banks, for the most part, have continued to underperform. As of June 22nd, only 11 bank stocks have risen in price this year, with 8 of them being regional banks.
Specifically, Bank of Qingdao is the standout performer among bank stocks this year, with its share price accumulating a gain of 24.55% since the start of the year, leading the pack by a wide margin. Bank of Chengdu and Bank of Jiangsu followed, with price increases of around 14% and 11% respectively. Bank of Ningbo, China Construction Bank (CCB), and Qilu Bank have also risen more than 6%. China Construction Bank (CCB) and Bank of China (BOC) are the only two state-owned major banks whose share prices have risen this year, gaining 9.68% and 3.66% respectively since the beginning of the year.
Turning to the list of decliners, Shanghai Pudong Development Bank (SPD Bank) leads with a 26.37% drop year-to-date, while Agricultural Bank of China (ABC), which was a strong performer last year, has fallen 15.04%, and Ruifeng Bank has also dropped over 15%. Additionally, Shanghai Rural Commercial Bank, Industrial Bank, Bank of Zhengzhou, and Bank of Wuxi have all declined more than 10% this year. Joint-stock banks like China Minsheng Bank, China Everbright Bank, and China Merchants Bank have all fallen over 8%.
Recalling the entirety of last year, Agricultural Bank of China (ABC), Bank of Xiamen, and Shanghai Pudong Development Bank (SPD Bank) occupied the top three spots for annual gains. Among them, Agricultural Bank of China (ABC) led with a gain of nearly 53%, while Bank of Xiamen and Shanghai Pudong Development Bank (SPD Bank) rose around 36% and 25% respectively. During the same period, Bank of Chongqing, Industrial and Commercial Bank of China (ICBC), and Bank of Ningbo also gained over 20% for the full year, and Bank of Qingdao rose more than 19%.
So far this year, only a few regional banks like Bank of Ningbo and Bank of Qingdao have been able to clearly extend last year's upward momentum. Among the state-owned majors, China Construction Bank (CCB), after rising nearly 13% last year, has continued to gain over 7% this year, with its share price hitting a historical high of 10.72 yuan per share in mid-June. However, CCB has the lowest proportion of A-shares among the state-owned majors. Its Hong Kong-listed shares have also risen over 12% year-to-date, ranking among the top three performers for major banks.
Dividend Payouts Enter Peak Period
As share prices have corrected and the peak period for dividend payouts arrives, the value proposition of bank stocks is attracting attention once again.
As of June 22nd, 16 A-share listed banks have already implemented their 2025 annual dividend distributions. In terms of timing, five banks—Ruifeng Bank, Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China (ABC), Zhangjiagang Bank, and Bank of Jiangyin—were the first to distribute dividends in May. The pace accelerated in June, with 11 banks—Bank of Shanghai, Bank of Changshu, Zijin Bank, Bank of Guiyang, China CITIC Bank, Ping An Bank, Industrial Bank, Bank of Hangzhou, Bank of Nanjing, Chongqing Rural Commercial Bank, and Suzhou Rural Commercial Bank—implementing their annual dividends successively.
This week, several more banks, including Bank of Suzhou, Bank of Qingdao, Bank of Lanzhou, China Zheshang Bank, and Bank of Xiamen, are scheduled to distribute dividends. According to Wind data, dividend proposals from 7 other banks have already been approved by shareholder meetings, and proposals from 13 banks have passed board resolutions.
Bank stocks have consistently been among the most generous dividend payers in the A-share market. Including interim dividends, the total dividend payout from 42 listed banks last year exceeded 645.6 billion yuan, an increase of over 13 billion yuan from the previous year. Among individual stocks, aside from Bank of Zhengzhou which again chose not to pay a dividend after 2024, the other 41 listed banks had cash dividend plans, with 14 having a payout ratio of 30% or higher.
State-owned major banks remain the main force in dividend distribution. Last year, ICBC and CCB each paid out over 100 billion yuan in dividends, while ABC, BOC, and China Merchants Bank paid out more than 50 billion yuan each. In terms of payout ratio, Shanghai Rural Commercial Bank (34.07%), China Merchants Bank (33.85%), and Bank of Shanghai (30.54%) ranked at the top; Bank of Xi'an (16.77%), Bank of Qingdao (20.2%), and Suzhou Rural Commercial Bank (20.75%) had relatively lower payout ratios.
Focusing on state-owned major banks, their payout ratios all remained above 30% last year. Among joint-stock banks, the lowest payout ratio last year was Huaxia Bank (23.29%), while the other listed joint-stock banks generally had payout ratios exceeding 25%. China Merchants Bank had the highest payout ratio, maintaining a level close to 34% last year, and China CITIC Bank also raised its payout ratio to over 30%.
An increase in payout ratio was also a major trend last year. Among the 42 A-share listed banks, 12 saw their payout ratios rise by more than 1 percentage point. Among them, Zijin Bank and Bank of Ningbo increased their payout ratios by over 5 percentage points, with full-year cash dividend ratios exceeding 29% and 27% respectively. Conversely, some banks saw significant declines in their payout ratios. Besides Bank of Zhengzhou again switching to no dividend, Bank of Xiamen and Bank of Lanzhou saw their cash dividend ratios drop by more than 6 percentage points, both falling below 30%. Their net profit attributable to parent company owners grew by 1.55% and declined 1.22% year-on-year, respectively, last year.
"Bank dividends overall remain stable, and current dividend yields appear attractive," stated Ma Tingting, Chief Banking Analyst at Guotai Haitong Securities. She noted that currently, the forward dividend yields for A-share and H-share banks for 2026 are approximately 4.85% and 5.70%, respectively. Among them, A-share large banks have dividend yields between 4% and 5%, while H-share large banks mostly exceed 5%.
In fact, following the share price pullback, the dividend yields of many A-share banks have returned to above 5%, and some banks with larger declines even have yields back above 6%. As of Monday's close, Huaxia Bank and Industrial Bank ranked first and second among A-share banks with dividend yields of 6.23% and 6.01%, respectively. Meanwhile, dividend yields for joint-stock banks like China Minsheng Bank, China Merchants Bank, and China CITIC Bank have rebounded to above 5%. Currently, a total of 16 banks have dividend yields exceeding 5%, nearly double the number at the start of the year. Ma Tingting believes that considering factors like potential new interim dividends this year, the dividend yield for some individual banks could potentially reach 7.8%.
From a valuation perspective, the median price-to-book (PB) ratio for A-share bank stocks is currently only 0.53 times. "This year, the technology sector has been active, putting overall pressure on bank stocks. As of the 18th, the bank index had fallen 8.3% cumulatively. Looking ahead, if market style tends to rebalance, the defensive attributes of bank sector dividends are expected to regain attention," Ma Tingting opined. She believes that in an environment of declining risk-free interest rates, dividend yields of 4% to 5% or even higher, coupled with banks' relatively stable dividend policies, still hold strong appeal for insurance funds, pension funds, and absolute-return-oriented capital.
Comments