Entering the second half of 2026, the A-share market has ushered in a new round of adjustment. As the core choice of high-dividend strategies, bank stocks that do not tell stories have traced a steep upward curve, and their value has once again been recognized by the market. Wind data shows that as of the close on November 11, the Shenwan Banking Index has surged 18.45% since the second half of the year, ranking first in gains among the 31 Shenwan first-level industries. Among the 42 listed banks, 22 have risen more than 20% since the second half, with 3 gaining over 30%.
In terms of individual stock performance, the banking sector has launched a "relay race of new highs." Wind data shows that as of November 11, 10 bank stocks have hit record highs within the past month, including state-owned giants such as Industrial and Commercial Bank of China (601398.SH), China Construction Bank (601939.SH), Bank of China (601988.SH), and Bank of Communications (601328.SH), as well as joint-stock and city commercial banks such as China CITIC Bank (601998.SH), Bank of Nanjing (601009.SH), Bank of Chengdu (601838.SH), and Bank of Changsha (601577.SH).
Behind the rally, bank assets are becoming a "connector" for capital reallocation, using stable dividends as an interface to channel long-term funds seeking certainty of returns into the equity market, building an orderly channel between stocks and bonds, credit, and the capital market. Against the backdrop of the normalization of "asset scarcity" and an overall contraction in market risk appetite, why has this channel formed? And how have bank stocks managed to stage an independent rally?
Bank Stocks Become "Hot Favorites" Again
Looking back at the market in the first half of 2026, the banking sector performed poorly. Under the extreme tilt of market risk appetite, the Shenwan Banking Index fell 12.27%, underperforming the Shanghai Composite Index by more than 15 percentage points. The turning point came in July. That month, the A-share technology sector underwent a major correction, with the Shenwan Electronics and Communications industries falling 34.72% and 31.90% respectively in a single month, while the STAR 50 Index dropped 25.90% in the same month. However, funds exiting the technology growth sector did not leave the market to wait and see, but instead shifted their attention to dividend assets represented by bank stocks.
With unique advantages, bank stocks gradually became the "ballast stone" amid volatile markets, injecting strong momentum into the stable development of the capital market. In July, the Shenwan Banking Index rose 11.57% in a single month, with all 42 A-share listed banks closing higher, posting an average monthly gain of 13.50%. Since then, the money-attracting effect of the banking sector has continued to strengthen. Throughout the third quarter, the Shenwan Banking Index rose 14.56%, while the Shanghai Composite Index fell 6.16% and the CSI 300 Index dropped 12.49% over the same period.
As of November 11, since the second half of the year, the Shenwan Banking Index has led the 31 Shenwan first-level industries with an 18.45% gain. Some individual stocks performed strongly, with Bank of Suzhou (002966.SZ), Bank of Communications, and China CITIC Bank all rising more than 30%, while 22 stocks including Bank of Beijing (601169.SH) and China Construction Bank surged over 20%.
Market capitalization milestones have come one after another. On October 14, China Construction Bank's total market value exceeded the 3 trillion yuan mark for the first time. On October 19, Industrial and Commercial Bank of China reclaimed the throne as the "market cap champion" of A-shares. On October 29, the combined market value of the four major banks—ICBC, Agricultural Bank of China, Bank of China, and China Construction Bank—surpassed 10 trillion yuan during intraday trading for the first time, setting a historic record. Overall, Wind data shows that as of November 11, the total market value of the 42 A-share listed banks reached 16.08 trillion yuan, an increase of approximately 2.9 trillion yuan from 13.18 trillion yuan at the end of June.
Long-Term Funds Collectively Rush to Buy Bank Stocks
This round of rally is the result of improved fundamentals, re-rating of pricing logic, and resonance on the capital front. Among these, the continuous inflow of long-term funds such as insurance capital and social security funds constitutes the most fundamental support for this rally. In August 2026, the "Administrative Measures for the Asset-Liability Management of Insurance Companies" was implemented, with regulators imposing hard constraints on core indicators such as the net investment income coverage ratio, while dividend income can be directly counted as net investment income. Combined with the new accounting standards under which high-dividend assets can be classified into FVOCI accounts without stock price fluctuations affecting current profits, insurance capital's allocation to bank stocks has been upgraded from "tactical risk aversion" to an "institutional choice."
Wind data shows that as of the end of the third quarter of 2026, insurance capital held heavy positions in 27 listed banks in total, with a market value of approximately 514.9 billion yuan. Among the top 20 stocks by insurance capital holdings, 11 are bank stocks: Shanghai Pudong Development Bank (600000.SH), Ping An Bank (000001.SZ), Industrial Bank (601166.SH), China Merchants Bank (600036.SH), Agricultural Bank of China (601288.SH), China Minsheng Bank (600016.SH), Hua Xia Bank (600015.SH), Industrial and Commercial Bank of China, Postal Savings Bank of China (601658.SH), China CITIC Bank, and Bank of China.
Public mutual funds also conducted "underweight replenishment" on the banking sector in the third quarter. Mutual funds have been underweight in the banking sector for many years. A research report by Zhongtai Securities in November noted that in the third quarter, mutual fund holdings in banks bottomed out and rebounded, with both active and passive funds turning to net inflows simultaneously. Among them, the market value of active fund holdings increased significantly on a quarter-over-quarter basis, and the proportion of bank free-float market value held by active funds stopped falling and rebounded, with most banks receiving increased holdings at the individual stock level. However, from a vertical perspective, active fund positions remain at a relatively low level. With catalysts such as third-quarter earnings expectations in October driving the sector upward, incremental funds are expected to continue entering.
From "Blindly Buying Dividends" to "Buying Certainty"
Funds from all directions are accelerating their inflow, but only if fundamentals can support it can the rally stand firm. In 2026, the fundamentals of the banking industry are undergoing substantive changes. From the perspective of net interest margin, a key indicator measuring the profitability of commercial banks, data from the National Financial Regulatory Administration shows that as of the end of June this year, the net interest margin of commercial banks was 1.41%, up 0.01 percentage points from the first quarter. This is also the first quarter-over-quarter rebound in the banking industry's net interest margin since it fell below 2% in the first quarter of 2022.
The latest financial reports of various banks further validate this trend. Wind data shows that as of the end of September 2026, 21 of the 42 listed banks saw their net interest margins rebound compared to the end of 2025. Reflected at the performance level, many banks have continuously innovated financial products and services, optimized business structures, and achieved steady growth in performance. According to third-quarter report data, in the first three quarters of 2026, the 42 listed banks achieved total operating income of 4.66 trillion yuan, a year-on-year increase of 7.81%, and realized net profit attributable to parent company shareholders of 1.75 trillion yuan, a year-on-year increase of 3.78%.
International rating agency Fitch also recently upgraded the ratings of several Chinese banks in a concentrated manner. On October 27, Fitch adjusted its operating environment score for China's banking industry from "bbb-" to "bbb," noting that China's banking industry has continued to improve in areas such as transparency, credit discipline, and regulatory frameworks. The stabilization of interest margins and the repair of fundamentals will further translate into certainty of dividends. Wind data shows that in the interim of 2026, the six major state-owned banks distributed a total of 220.989 billion yuan in dividends, an increase of over 16 billion yuan compared to the same period last year.
On the basis of maintaining continuity and stability of dividends, the six major state-owned banks further optimized their shareholder return mechanisms, collectively raising the interim cash dividend ratio from 30% to 31% for the first time, and several listed banks also joined or restarted interim dividends for the first time. This also means that the banking system's annual profits of hundreds of billions of yuan are flowing back to the capital market and millions of households through institutionalized and normalized dividend channels. In the view of industry insiders, in a low interest rate environment, raising the dividend ratio is not just an improvement in shareholder returns, but also a signal of enhanced certainty for dividend assets.
"This shows that banks have sufficient capital and profit space to maintain this ratio, and the dividend attribute is shifting from 'expectation' to 'realization,'" Fu Yifu, a special researcher at Su Shang Bank, told Times Finance. According to Wind data, as of the close on November 11, 21 of the 42 listed banks still had dividend yields (TTM) exceeding 4%, with 4 exceeding 5% and 3 banks having dividend yields exceeding 6%, far exceeding the one-year fixed deposit rate and most low-risk wealth management products.
Fu Yifu emphasized that the rally in bank stocks should not be explained solely by "high-dividend risk aversion," as it points to a deeper migration of pricing logic. "In the past, the market bought banks out of a defensive mindset, treating them as 'bond-like assets' for a base position, but the traditional 'bond substitute' logic has a static flaw, namely that high dividends may be eroded by continued stock price declines or unsustainable dividend payouts."
"Currently, mainstream institutions have gradually reached a consensus that the banking industry is entering the tail end of the risk cycle, the first-order transmission of ROE has already improved, and the sector is expected to be re-rated from a high-dividend defensive asset to a 'high-certainty equity asset,' while the 'certainty premium' emphasizes the ability of an asset to provide stable returns in the long term," Fu Yifu told Times Finance, pointing out that when the slope of economic recovery is mild and the long-term narrative of technology growth frequently encounters valuation pressure, the scarcity of assets with predictable earnings, deliverable dividends, and valuation safety margins will systematically rise.
Market conditions will rotate, but once the channel is built, it will not easily disappear. When dividends become predictable cash flows and the entry and exit of long-term funds have institutional arrangements, the role of bank stocks as vehicles for capital intermediation will far outlast a single round of gains.
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