According to a research report from CITIC SEC, financial data for May indicates subdued real economy financing demand, with ample funds in the financial system potentially supporting financial asset performance. Since 2026, significant net redemptions in broad-based ETFs have driven sustained net selling of the banking sector. As of June 12th, statistics show that 18 key broad-based ETFs covering the banking sector hold approximately 50 billion yuan in bank stocks, a decline of over 70% from the end of 2025, suggesting the peak impact of ETF redemptions on the sector has passed, leaving limited room for further shocks. Looking ahead to the second half of the year, as banks enter a phase of fundamental recovery, a sector valuation re-rating is anticipated. Furthermore, sustained attractive dividend yields continue to appeal to low-risk-preference capital, indicating the potential for relatively certain absolute returns.
Event: On June 12, 2026, the People's Bank of China released financial data for May 2026. The outstanding aggregate financing to the real economy (AFRE) grew 7.7% year-on-year at the end of May (7.8% in April). New AFRE in May amounted to 2.03 trillion yuan, 260 billion yuan less than the same period last year. New RMB loans were 520 billion yuan, 100 billion yuan less than the same period last year. The main views of CITIC SEC are as follows:
Financial Data: Subdued Real Demand, Ample Financial System Funds
New AFRE in May was 2.03 trillion yuan, 260 billion yuan less than the same period last year, with the outstanding growth rate declining by 0.1 percentage point from the previous month to 7.7%. 1) Government bond data implies fiscal stimulus still has room. Net government bond financing in May was 1.22 trillion yuan, 238.5 billion yuan less than the same period last year, mainly due to a high base effect from the concentrated issuance of replacement bonds and special treasury bonds during the same period last year. 2) Corporate loan data implies weak demand. In May, corporate short-term loans, medium- and long-term loans, and bill financing changed year-on-year by -10 billion yuan, -350 billion yuan, and +482.4 billion yuan, respectively. The continued high growth in bill financing, coupled with a significant year-on-year decrease in corporate medium- and long-term loans, reflects continued caution in corporate capital expenditure intentions. This is also related to policies encouraging direct financing and high-quality companies shifting towards bond issuance. 3) Household loan data implies household balance sheets are still improving. In May, household short-term loans and medium- and long-term loans decreased year-on-year by 63.2 billion yuan and 131.7 billion yuan more, respectively. On one hand, household willingness to take on consumer debt remains weak, with income expectations awaiting improvement. On the other hand, while property transactions in high-tier cities show signs of stabilization, overall real estate sales and mortgage issuance remain weak, compounded by factors such as early mortgage repayments.
Banking Sector Stock Performance Largely Influenced by Fund Flows Since 2026
Two key fund flow factors affecting bank stock prices have been identified: 1) At the individual stock level, based on top-10 shareholder data, since 2026, China Securities Finance Co., Ltd. has shown significant reductions in holdings of some joint-stock banks and regional banks, while Central Huijin Investment Ltd. and Central Huijin Asset Management Ltd. continue to demonstrate characteristics of long-term stable holdings. As of the end of Q1 2026, China Securities Finance Co., Ltd. reduced its holdings in Shanghai Pudong Development Bank, CITIC Bank, and Ping An Bank, and is no longer listed among the top ten shareholders of China Everbright Bank, Industrial Bank, China Merchants Bank, Bank of Beijing, and Hua Xia Bank, corresponding to a reduction of at least 14% to 67%. In contrast, the bank stock holdings of Central Huijin Investment and Central Huijin Asset Management have been relatively stable. 2) At the ETF level, massive net redemptions in key broad-based ETFs since 2026 have driven sustained net selling of the overall banking sector. Broad-based ETFs have experienced continuous net redemptions this year. Statistics show that 23 key broad-based ETFs had cumulative net redemptions of 1.42 trillion yuan by the end of May. Further analysis of "large, irregular" net subscription or redemption activities exceeding 10 billion yuan in a single day for these key ETFs reveals that their trends are significantly synchronized with the movements of the bank index.
Selling Peak Passed, Allocation Value Emerges
As of the end of May 2026, statistics show that 18 key broad-based ETFs covering the banking sector held only 49.865 billion yuan in bank stocks, a decrease of over 130 billion yuan from 182.382 billion yuan at the end of 2025, representing a drop of over 70%. The peak impact of ETF net redemptions on the banking sector has passed, with limited room for subsequent shocks. Since June, as the broader market retreated from highs, the overall scale of these key broad-based ETFs covering the banking sector has remained stable. As of June 12th, their holdings of bank stocks amounted to 50.31 billion yuan, a slight increase from the end of May. As the selling pressure from ETFs diminishes, coupled with intensified volatility in the high-flying technology sector, the banking sector's performance has noticeably recovered. From the beginning of June until the close on June 12, 2026, the CITIC Bank Index (CI005021.WI) rose by 5.14%. During the same period, the SSE 50, CSI 300, CSI 1000, and STAR 50 indices changed by -1.04%, -2.35%, -2.45%, and -5.03%, respectively. The bank index outperformed these indices by 6.18, 7.49, 7.59, and 10.17 percentage points, demonstrating both absolute and relative return value. Meanwhile, as of June 12, 2026, the sector's average static dividend yield is approximately 4.3%, with some large-cap stocks offering yields above 5%. The average static price-to-book (PB) ratio is 0.60x, still within a high value-for-money range.
Risk Factors
Significant slowdown in macroeconomic growth; worse-than-expected deterioration in bank asset quality; unexpected changes in regulatory and industry policies; slower-than-expected progress in company strategies.
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