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The share prices of the four major state-owned banks continue to set new highs.

At the opening of the market on August 27, the A-share prices of the four major banks hit new highs, with the increase exceeding 1% at one point. However, the increase narrowed later. As of midday close, Industrial and Commercial Bank of China rose 0.47%, Agricultural Bank of China rose 0.41%, Bank of China rose 0.39%, and China Construction Bank rose 0.24%.

Since the beginning of this year, bank stocks have performed strongly as a whole, leading the market. According to the data from Oriental Wealth Choice, since the beginning of the year, Agricultural Bank of China has ranked first among the four major banks, with an increase of 43.15%; followed by Industrial and Commercial Bank of China, Bank of China, and China Construction Bank, with increases of 42.26%, 34.43%, and 33.84% respectively since the beginning of the year.

High dividend yield and stability support

Since August, the share prices of the four major banks have hit new highs. Analysts generally point out that high dividend yields and stability have become the main factors supporting the rise of bank stocks.

Lin Yingqi, a banking analyst at CICC Research Department, believes that compared with non-financial industries that are more dependent on cash flow, banks have smaller profit fluctuations and can still maintain an ROE level of around 10%; despite a sharp rise in stock prices, banks' dividend yields are still around 5%, which is about 300BP higher than the risk-free rate. The dividend yield is higher than traditional high-dividend industries such as electricity and transportation, and the dividends are more stable than those in industries such as coal, making them scarce in the market.

The banks have also recently announced their mid-term dividend plans. Currently, the four major banks have confirmed their specific mid-term dividend plans. However, as early as this year when the new "Nine National Regulations" were released, the four major banks had already responded.

The State Council recently issued the "Several Opinions on Strengthening Supervision, Preventing Risks and Promoting High-Quality Development of the Capital Market" (also known as the new "Nine National Regulations"), which proposed strengthening the supervision of cash dividends of listed companies in the part of strict continuous supervision of listed companies. It mentioned that it is necessary to promote multiple dividends a year, pre-dividends, and dividends before the Spring Festival. Subsequently, many large state-owned banks have responded to the requirements of the new "Nine National Regulations" and clarified the mid-term dividend plan.

Industrial and Commercial Bank of China, Agricultural Bank of China, China Construction Bank and Bank of China have all clearly defined the distribution ratio of interim dividends and interest payments, namely, the total dividend amount shall not exceed 30% of the current period's net profit attributable to the parent company or the profit after tax of shareholders.

Lin Yingqi said that in the next three to six months, the bank's dividend rate of about 5% may decline to about 4%. However, from a time perspective of 6 to 12 months, investors need to pay attention to the impact of the downward trend in credit growth, the disposal of existing real estate debts, and residents' debt repayment tendency on fundamentals.

Supervision continues to guide the optimization of asset-liability structure

The regulatory authorities' protection of interest rate spreads and the market's expectation that the downward slope of banks' net interest margins will slow down and fundamentals will soon bottom out also support the banking sector.

In the first half of this year, financial regulatory authorities guided the weakening of scale assessment and repeatedly stressed that banks should downplay their "scale complex." This included optimizing the quarterly financial industry value-added accounting method and stopping "manual interest supplement" deposits.

The People's Bank of China pointed out in its latest monetary policy implementation report that since the self-discipline mechanism was guided to start the rectification work of illegal manual interest payment in early April, as of the end of June, the rectification progress of 21 national banks has exceeded 90%. According to calculations, after the rectification work is completed, the interest expenses saved by the banks are close to the effect of reducing the deposit interest rate once.

"Regulating the manual interest payment behavior of banks on deposits will help strengthen the deposit interest rate adjustment effect, improve banks' interest rate pricing ability, maintain a reasonable market competition order, ease the pressure on banks' narrowing net interest margins, and enhance their ability to support the real economy," the report said.

On August 21, Liao Yuanyuan, Director of the Statistics and Risk Monitoring Department of the Financial Supervision Administration, further pointed out that in the face of the pressure of slowing profit growth, commercial banks have used various methods to tap internal potential, reduce costs and increase efficiency in recent years. At present, the profitability of China's commercial banks is still in a reasonable range. In the first half of this year, the net profit of commercial banks increased by 0.4% year-on-year, still achieving positive growth in net profit. During the same period, the bank's asset profit rate and capital profit rate also remained basically stable.

In the next step, the Financial Regulatory Administration will guide banking institutions to continue to strengthen refined management, optimize asset-liability structure, cultivate new profit growth points, and continuously improve profitability.