China Galaxy Securities has released a research report stating that the financial service system for key agriculture-related sectors is expected to be further improved, benefiting stable credit allocation, quality enhancement, and efficiency gains for banks. Listed banks' dividends remain generally continuous and stable. In an environment of low interest rates and accelerated entry of medium- to long-term funds into the market, the banking sector's attributes of high dividends and low valuations continue to hold sustained appeal for long-term capital such as insurance funds, accelerating the repricing of valuations. Simultaneously, the trend of improvement in fundamental performance remains unchanged. Coupled with a resurgence in safe-haven demand due to geopolitical influences, bank valuations are expected to demonstrate continued resilience. The firm maintains a positive outlook on the dividend value of the banking sector and continues its recommended rating. Key views from China Galaxy Securities are as follows:
Dividend distribution strength among sample banks remains robust, highlighting the sector's income value. Among 22 sample banks, 21 planned annual dividend distributions, with 10 banks increasing their payout ratios. The total dividend amount for these 21 banks reached 584.247 billion yuan, a year-on-year increase of 1.67%. The average payout ratio, calculated based on net profit attributable to parent company shareholders, was approximately 27.79%, up 0.29 percentage points year-on-year. By segment, the dividend ratio for state-owned banks remained largely stable compared to 2024, holding steady at around 30%, while the average ratio for joint-stock banks increased by 0.5 percentage points to 28.24%. The banking sector's dividends are overall stable and consistent. The characteristics of high dividends and low valuations remain attractive to medium- and long-term capital. Based on the latest annual dividend plans of listed banks, the estimated average dividend yield for listed banks in 2026 is 4.39%, while the current average price-to-book (PB) ratio is 0.6 times, still at a relatively low level. Concurrently, amid current uncertainties from geopolitical conflicts, safe-haven demand has increased. Combined with the steady recovery of the banking sector's fundamental performance, valuation resilience is expected to persist.
The financial service system for key agriculture-related sectors is expected to continue improving, with credit allocation focusing on quality and efficiency. The National Financial Regulatory Administration issued a notice concerning financial support for comprehensive rural revitalization in 2026. It outlines deployments across five major areas: continuously strengthening financial supply in key sectors, solidly implementing regularized and targeted assistance, continuously enhancing rural financial service capabilities, striving to optimize the rural financial service environment, and strengthening regulatory guidance in a coordinated manner. This policy aims to improve the rural financial service system and enhance the quality and efficiency of rural financial services. Specifically, financial supply in agriculture-related sectors emphasizes "investing in people," encouraging financial institutions to expand consumer finance scenarios and strengthen targeted services to unleash the potential of domestic demand in county and rural areas. The policy indicates a steady increase in agricultural financial input while raising focus on quality and efficiency. On one hand, the policy explicitly calls for improving a system of differentiated competition, setting tailored growth targets for differentiated agricultural loans and inclusive agricultural loans. This helps various financial institutions leverage their unique advantages, with fiscal-financial coordination tools remaining important levers. On the other hand, it aims to resolutely prevent and correct "involution-style" competitive practices, which helps maintain credit pricing order in key agriculture-related sectors. This approach enhances the quality and efficiency of credit allocation while alleviating pressure on bank net interest margins. Furthermore, strengthened credit risk prevention and control, along with strict prevention of new hidden debt under the guise of agricultural finance, are beneficial for stabilizing bank asset quality.
Investment recommendation: Individual stock recommendations include Industrial and Commercial Bank of China, Agricultural Bank of China, Postal Savings Bank of China, China Merchants Bank, Bank of Ningbo, and Bank of Changshu. Risk提示: Risks include economic performance falling short of expectations and potential deterioration in asset quality; risks from declining interest rates putting pressure on Net Interest Margin (NIM); and risks from tariff impacts leading to weaker demand.
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