After several days of adjustment, the banking sector collectively surged again, with multiple individual stocks reaching new highs during trading. On August 21, the Shanghai Composite Index touched a new stage high of 3,787.98 during the session before pulling back slightly, with the index turning from red to green by the close. In terms of sector performance, the banking sector, which had been consolidating for several days, returned to gains. Among the 42 A-share banking stocks, 40 posted advances, with Agricultural Bank of China and Postal Savings Bank Of China Co.,Ltd. shares hitting new all-time highs.

On the news front, several foreign financial giants have recently expressed bullish views on Chinese banking stocks. JPMorgan pointed out in its latest report that Chinese banking stocks are poised for further gains, as the banking industry benefits from stabilizing net interest margins and growing fee income growth. UBS expressed optimism about the sustainability of Chinese banking dividends and further upward momentum in a report released in early August, expecting fundamental improvements.

The domestic banking industry has also welcomed multiple positive factors recently. According to key regulatory indicators for the banking industry in Q2 2025 released by the National Financial Regulatory Administration, there were signs of marginal improvement in banking profitability pressure in the first half of this year. The net interest margin stood at 1.42%, down 1 basis point quarter-on-quarter, with joint-stock banks remaining flat compared to the previous quarter. The non-performing loan ratio for commercial banks was 1.49%, improving by 2 basis points quarter-on-quarter.

Additionally, the recently introduced "national subsidies" in the banking consumer loan sector, with national fiscal interest subsidies, are expected to stabilize bank net interest margins while boosting credit demand.

**Agricultural Bank and PSBC A-shares Hit New Highs Again**

On August 21, the A-share banking sector strengthened again, with 40 stocks in the sector posting gains. Qingdao Bank and Agricultural Bank of China led the gains with increases of 2.21% and 2.12% respectively.

Notably, Agricultural Bank of China, which recently earned the title of "A-share market capitalization king," set new records again today, achieving its fourth consecutive daily gain. The stock touched a new high of 7.24 yuan during trading, pushing its total market value to 2.46 trillion yuan, narrowing the gap with Industrial and Commercial Bank of China's 2.52 trillion yuan to just 60 billion yuan.

Similarly, Postal Savings Bank Of China Co.,Ltd., another state-owned major bank, also touched a new trading high of 6.28 yuan per share during the session. By the close, PSBC recorded a 1.30% gain with a total market value of 726.2 billion yuan, ranking sixth among banking stocks by market capitalization.

Despite consecutive gains, Agricultural Bank of China's price-to-book ratio remains in "broken net" territory below net asset value per share, closing at 0.98 times on August 21. Except for China Merchants Bank with a P/B ratio of 1.08, the remaining 41 A-share listed banks are all in "broken net" status below 1 P/B. For example, China Minsheng Banking Corp, Bank of Guiyang, Huaxia Bank, Bank of Zhengzhou, Bank of Lanzhou, China Everbright Bank, and Bank of Beijing all have P/B ratios below 0.5.

Regarding Agricultural Bank's outperformance, securities analysts recently noted that from a fundamental perspective, Agricultural Bank currently leads among listed banks in terms of earnings growth and excess provision thickness, ranking first among the six major banks. According to their calculations, comparing bank asset quality and provision thickness, Agricultural Bank's "excess provisions/net profit attributable to parent company" ratio was 107% at the end of 2024, exceeding the average levels of major banks and A-share listed banks.

**Multiple Foreign Institutions Bullish on Chinese Banking Stocks**

On the news front, foreign institutions have recently expressed optimism about the future performance of Chinese listed banks. JPMorgan analyst Katherine Lei stated in a latest report that Chinese banking stocks are expected to rise further in the second half of 2025, benefiting from stable net interest margins, growing fee income, and high dividend returns.

According to predictions, the A-share banking sector has potential upside of up to 15%, while the Hong Kong-listed banking sector could rise by 8%. The report estimates that mainland banks covered have an average dividend yield of approximately 4.3% this year, which is quite attractive in the current market environment.

"We remain bullish on China's banking sector, as ample liquidity and other factors will continue to favor asset allocation to high-dividend stocks," she stated. The analyst indicated that driven by improving net interest margins and moderate recovery in fee income, banks' revenue and profit growth will improve in the second half.

JPMorgan believes the interest rate cutting cycle is nearing an end, with 1-2 more rate cuts expected in the second half of this year or 2026.

UBS also expressed a more optimistic view about the sustainability of Chinese banking dividends and further upward momentum in a report released in early August. UBS considers H-share banks with dividend yields above 4.2% and A-share banks above 4.0% attractive.

In its five-year outlook, UBS expects China's banking fundamentals to improve, with revenue growth resuming from 2026, alongside bottoming net interest margins, recovering fee income, and increased contribution from financial investments.

**Banking Industry Welcomes Multiple Positive Factors**

This year, the banking industry has also launched an "anti-involution" trend. In July, Guangdong financial regulators issued a negative list for "involutionary" competition in the banking and insurance industries, guiding industry associations to research and formulate self-regulatory conventions against unfair competition. Subsequently, banking associations in Shanghai, Zhejiang, Anhui and other regions followed suit with "anti-involution" measures, addressing issues such as mortgage rebates, auto loan commissions, and disguised interest subsidies, pushing banking institutions out of involutionary "price wars."

Industry research professionals noted that commercial banks led by state-owned major banks taking the lead in "anti-involution" is expected to reduce the intensity of price wars and create a relatively fair competitive environment for small and medium banks. On the other hand, it is expected to shift industry competition logic from "competing on scale and cost" to "competing on service and innovation," prompting small and medium banks to strengthen risk management capabilities and refined operational levels.

Notably, multiple financial regulatory indicators for commercial banks showed signs of stabilization or improvement in the second quarter of this year. Data disclosed by the National Financial Regulatory Administration shows that in the first half of 2025, commercial banks achieved cumulative net profits of 1.2 trillion yuan, down 1.20% year-on-year, with the decline significantly narrowing by 1.1 percentage points compared to Q1's -2.3%.

Commercial banks' net interest margin at the end of Q2 was 1.42%, narrowing by 1 basis point quarter-on-quarter, with margin compression slowing significantly. As of the end of Q2, non-performing loan balances totaled 3.4 trillion yuan, decreasing by 2.4 billion yuan from the previous quarter end, with the NPL ratio at 1.49%, down 2 basis points from the previous quarter end, showing continued risk improvement.

Data shows that in the first half of this year, profit growth rates for state-owned major banks, joint-stock banks, city commercial banks, and rural commercial banks were up 1.1%, down 2%, down 1.1%, and down 7.9% year-on-year respectively, compared to Q1 growth rates of up 0.1%, down 4.5%, down 6.7%, and down 2.0% respectively.

Recently, multiple departments jointly issued the "Implementation Plan for Personal Consumer Loan Financial Interest Subsidy Policy" and "Implementation Plan for Service Industry Business Entity Loan Interest Subsidy Policy," known as "national subsidies" in the banking consumer loan sector. Through deep coordination between financial subsidies and financial support, these policies provide "real money" support for household consumption.

Securities analysts noted that the policy, through a model of "fiscal subsidization of interest rate spreads + bank scale expansion," is expected to stabilize bank net interest margins while boosting credit demand, promoting a virtuous cycle in the consumption sector. State-owned major banks and joint-stock banks, as main operating institutions, will directly benefit from interest income growth driven by loan portfolio expansion.