On the morning of October 29, bank stocks strengthened once again, with the combined market value of the four major state-owned banks exceeding 10 trillion yuan for the first time, supported by multiple positive factors including Fitch's rating upgrade, stabilization of net interest margins, and demand for safe-haven funds.
On the morning of October 29, bank stocks strengthened once again, with China Construction Bank Corporation (ASX: N/A), Industrial and Commercial Bank of China (ASX: N/A), Bank of Communications (ASX: N/A), and Bank of Chengdu (ASX: N/A) all collectively hitting record intraday highs. As of the midday close, Bank of Qingdao (ASX: N/A) rose 7.85%, Bank of Chengdu (ASX: N/A) gained 6.08%, Qilu Bank (ASX: N/A) climbed 4.49%, with Ruifeng Bank (ASX: N/A), Bank of Nanjing (ASX: N/A), and Bank of Chongqing (ASX: N/A) also following the upward trend.
Among the state-owned banks, Bank of Communications (ASX: N/A) rose 2.54%, Industrial and Commercial Bank of China (ASX: N/A) gained 2.22%, while China Construction Bank Corporation (ASX: N/A), Agricultural Bank of China (ASX: N/A), Bank of China (ASX: N/A), and Postal Savings Bank of China (ASX: N/A) all rose more than 1%.
The combined market value of the four major state-owned banks—ICBC, Agricultural Bank of China, Bank of China, and China Construction Bank—surpassed 10 trillion yuan for the first time in history. Among them, Industrial and Commercial Bank of China (ASX: N/A) had a total market value of 2.94 trillion yuan, China Construction Bank Corporation (ASX: N/A) 2.35 trillion yuan, Agricultural Bank of China (ASX: N/A) 2.58 trillion yuan, and Bank of China (ASX: N/A) 2.15 trillion yuan.
On the news front, Fitch Ratings upgraded the viability ratings of six Chinese state-owned banks on October 27. Fitch believes that Chinese state-owned banks, leveraging their dominant market positions, extremely strong funding capabilities, prudent asset-liability management, and close ties with the government, have demonstrated stable profitability and asset quality across different economic cycles. At the same time, Fitch Ratings also revised its operating environment score for Chinese banks from 'bbb-'/stable to 'bbb'/stable, reflecting continuous improvement in regulation, strengthened credit discipline, and reduced shadow banking risks. These advantages, combined with the continuous improvement in the operating environment, have enhanced these state-owned banks' resilience through economic cycles and supported the upgrade of their viability ratings.
Currently, A-share listed banks are about to see a密集 disclosure of their third-quarter reports, and one of the most important marginal changes in the banking industry this year is the stabilization of net interest margins. Data from the National Financial Regulatory Administration shows that the net interest margin of commercial banks in the second quarter of 2026 was 1.41%, up 1 basis point quarter-on-quarter. This is the first time since 2022 that commercial banks' net interest margin has achieved quarter-on-quarter growth in a single quarter.
A research report from Western Securities believes that during this period, bank stocks have delivered both absolute returns and relative returns. On one hand, amid a weak macroeconomic cycle, the interim results of listed banks have remained stable, with state-owned major banks and certain high-quality city and rural commercial banks showing improved profit growth compared to the first-quarter reports, led by high-performing banks, creating room for a phased upward revision of the sector's valuation center. On the other hand, since the third quarter, technology valuations have "deflated bubbles," and with shrinking trading volume, the banking sector—characterized by "undervaluation + high dividends + large market capitalization"—has become a "reservoir" for phased reallocation of funds. In addition, as the rotation in growth sectors slows, medium- and high-frequency funds may also buy bank assets for trend arbitrage and safe-haven hedging.
The continuous rise in bank stocks has sparked market discussions about whether current bank stock valuations are already too high. In response, a research report from Huafu Securities argues that, on the whole, current bank stock valuations are not significantly overvalued compared to 2025. On one hand, the banking industry itself has relatively stable earnings growth attributes, driving the current rise in the bank index, and its PB valuation is significantly lower than last year's high. On the other hand, dividend yields also have a relative comparative advantage over interest rates, and since August, bank stocks have only seen a "structural rise," with overall valuations not high.
Huafu Securities stated that, based on patterns, bank stocks generally experience excess performance in the fourth quarter. On one hand, from the perspective of capital and institutional behavior, as the year-end assessment approaches in the fourth quarter, public funds partially switch from high-volatility growth to low-volatility blue chips. On the other hand, at year-end, insurance funds lay out early for the "good start" campaign, creating a natural demand for high-dividend assets. In addition, the banking sector has strong earnings certainty, making it less likely to have expectation gaps when trading next year's performance expectations at year-end.
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