In response to the persistent undervaluation and sustained pressure on bank sector valuations, several listed commercial banks have recently initiated measures to stabilize their market value. Institutions such as China Everbright Bank, Industrial Bank, China Merchants Bank, and China CITIC Bank have established dedicated "market value management teams," moving towards a more systematic and institutionalized approach to managing their worth. Concurrently, banks including Chongqing Rural Commercial Bank and Bank of Chongqing have released positive preliminary earnings reports for the first half of the year. Furthermore, significant shareholders and senior management at institutions like Bank of Shanghai and Bank of Nanjing have substantially increased their holdings with substantial capital injections.
Industry experts suggest that the confluence of positive preliminary half-year results for 2026, coupled with major shareholder and insider buying, alongside the implementation of formalized market value management strategies, creates a powerful synergy. This combination is expected to catalyze a phase of valuation recovery within the banking sector. Overall, the sector presents a compelling safety margin characterized by low valuations and high dividend yields. With earnings validation and supportive policy measures providing a foundation, the momentum for valuation repair is strengthening, potentially shifting the sector's trajectory from a purely defensive play towards a genuine value re-rating.
Banks Form Dedicated Teams to Defend Valuations
Recently, Industrial Bank publicly affirmed its confidence in the prospects of China's capital markets. The bank stated its commitment to strengthening its fundamental operations, improving long-term mechanisms for market value management, striving to enhance dividend returns, and rewarding shareholder trust through stable performance. It also pledged to actively support the high-quality development of listed companies and expand its equity asset allocation to help maintain stable market operations.
Similarly, China Everbright Bank, in response to investor inquiries, expressed its firm optimism regarding China's capital markets. The bank has established a "market value management team" to comprehensively oversee related work and actively safeguard the company's value and shareholder rights.
Market value management is evolving from sporadic investor communications into a regularized, institutionalized practice for listed banks. In June, Peng Jiawen, Vice President of China Merchants Bank, revealed at the 2025 annual general meeting that the bank had set up a market value management team, which he leads. The team holds regular analysis meetings to incorporate market feedback and relay investor and shareholder demands into internal strategic planning and dividend policy decisions. Earlier, in March, Zhang Qing, Board Secretary of China CITIC Bank, noted that the bank had established a market value management team under its senior management in 2025 to drive related initiatives. This includes incorporating market value performance into the assessment system and implementing measures like raising dividend payout ratios and introducing interim dividends to stabilize investor return expectations.
Wang Pengbo, Chief Analyst at Bocom Consulting, commented that the establishment of permanent "market value management teams" by several joint-stock banks signifies a shift. Value management is moving from a reactive function handled by investor relations departments to a cross-departmental,常态化 coordination mechanism. This allows continuous feedback from the capital markets to be integrated into internal decision-making processes concerning assets and liabilities, dividends, and risk management.
"This change reflects that, in an industry environment where capital replenishment is becoming more challenging, leading joint-stock banks are beginning to address the gap between market expectations and internal operations," Wang Pengbo stated. "It also signals to the market that bank management is paying greater attention to the rights of minority shareholders and proactively working to bridge valuation perception gaps." He believes it is highly likely that more listed banks will follow suit in establishing corresponding organizational mechanisms.
The collective push for market value management comes against the backdrop of prolonged pressure in the secondary market. Reviewing the year's performance, the Wind Banking Index has experienced significant volatility. After hitting an intra-year high of 7223.57 points early in the year, it briefly fell to 6627.36 points on January 29 before recovering. Following multiple fluctuations, it climbed to 7119.16 points on June 12 only to decline again, reaching an intra-year low of 6369.66 points on July 1. The sector began a gradual recovery in July, briefly rebounding to 7128 points intraday. As of the close on July 22, the Banking Index stood at 6994.55 points, up 1.12% for the day.
At the individual stock level, during the morning session on July 22, all 42 A-share listed bank stocks initially traded in negative territory before stabilizing and recovering. By the close, 33 bank stocks finished higher. Gains for stocks like Bank of Chengdu, Bank of Communications, China Merchants Bank, Chongqing Rural Commercial Bank, and Industrial Bank ranged between 0.13% and 2.21%. However, valuation pressures remain pronounced. As of July 22, all 42 A-share listed banks traded below their book value, with price-to-book (P/B) ratios fully below 1, creating a comprehensive "破净" scenario. The sector's P/B ratios range from 0.27 to 0.92 times.
"Currently, listed bank stock prices are in the破净区间, with market concerns over sustained profitability and asset quality suppressing valuations," noted Wu Zewei, a special researcher at Suzhou Rural Commercial Bank. He pointed out that the institutionalized advancement of market value management teams can improve market expectations across multiple dimensions. This includes strengthening investor relations management to improve communication channels between management and the market; optimizing dividend and capital return mechanisms to bolster long-term investor confidence; incorporating market value performance into internal assessments to better align operational decisions with shareholder value; and proactively disclosing plans for valuation enhancement to reduce expectation gaps caused by information asymmetry.
Sector Trajectory May Shift from Defense to Revaluation
Amidst the sector's volatile recovery, positive fundamental news has also emerged. Chongqing Rural Commercial Bank, Bank of Chongqing, and Shanghai Pudong Development Bank have recently disclosed their operating performance for the first half of 2026.
Chongqing Rural Commercial Bank led with positive preliminary results, reporting operating revenue of 15.892 billion yuan, a year-on-year increase of 7.81%, and net profit of 8.343 billion yuan, up 6.32%. Bank of Chongqing reported first-half revenue of 8.486 billion yuan, a 10.8% increase, and net profit attributable to shareholders of 3.518 billion yuan, up 10.28%. Shanghai Pudong Development Bank disclosed steady credit expansion, with total loans (including bill discounts) reaching 5.868251 trillion yuan by the reporting period-end, a 2.88% increase from the end of the previous year. Total deposits grew 5.05% to 5.864101 trillion yuan. The bank also reported building over 440 AI application scenarios covering areas like digital marketing, ecosystems, operations, risk control, and management.
Beyond fundamental support, sustained "real money" share purchases by major shareholders and management are sending strong signals of long-term confidence to the market. Throughout the year, numerous banks including Bank of Shanghai, Bank of Nanjing, Postal Savings Bank of China, Bank of Chengdu, Chongqing Rural Commercial Bank, Suzhou Rural Commercial Bank, and Ruifeng Rural Commercial Bank have seen share purchases by their major shareholders or directors and senior management.
Bank of Shanghai recently announced that some of its directors, senior executives, and mid-level managers plan to voluntarily increase their holdings of the bank's A-shares, with a total intended purchase amount of no less than 15 million yuan. Meanwhile, major shareholder Jiangsu Communications Holding Group has, using its own funds, increased its holdings in Bank of Nanjing by approximately 123 million shares between September 23, 2025, and July 17, 2026.
Wu Zewei believes the combination of positive 2026 half-year earnings previews, major shareholder and insider buying, and the rollout of market value management measures creates a multi-faceted positive catalyst. This is expected to drive a phase of valuation recovery for the banking sector. The positive earnings previews validate profit resilience, while stabilizing net interest margins and robust asset quality provide fundamental support for revaluation. Share purchases by major shareholders and management signal recognition of long-term value, offering direct capital support and boosting confidence. The institutionalization of market value management reinforces value maintenance at a systemic level, improving market expectations regarding capital returns and governance capabilities. Overall, the banking sector offers a safety margin of low valuation and high dividends. With earnings validation and policy support underpinning the market, the forces driving valuation repair are gaining strength, and the sector's performance may evolve from a defensive characteristic towards a phase of value re-rating.
Looking ahead, Wang Hongying, President of the China (Hong Kong) Institute of Financial Derivatives Investment, judges that the banking sector, as a large-cap blue-chip segment with stable profits and consistent dividends, will continue to attract institutional investors seeking steady returns. He noted that the annual concentrated dividend period for banks around June and July typically leads to temporary share price declines. However, supported by profit expectations, share prices are expected to gradually recover in a post-dividend "filling" trend, driving steady price appreciation. He also emphasized that market value management itself is not an ultimate goal but rather a means to reasonably adjust share prices and dividend levels.
"Ultimately, market value management is merely a technical tool. The intrinsic value growth and profit prospects of commercial banks themselves are the core logic determining market valuation," Wang Hongying concluded.
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