September 1st, Shenzhen

During the 22nd UBS A-Share Seminar held in Shenzhen, discussions were held regarding the pullback in bank stocks, «deposit migration,» and consumer loan subsidy policies.

The Wind Banking Index indicates that the banking sector is undergoing a pullback, with declines of approximately 0.85% and 2.17% in July and August, respectively. Market views largely attribute this to factors such as style rotation and profit-taking. However, recent policies promoting «anti-involution» and consumer loan subsidies have provided policy support for banks.

«Deposit Migration» May Be Favorable for Banks

July financial data shows an increase in non-bank deposits year-on-year and a decrease in household deposits. Is there really a phenomenon of «deposit migration» in the A-share market?

So-called «deposit migration» mainly refers to households or businesses moving bank deposits to non-bank institutions or using them for stock investments. Current data suggests the scale of this phenomenon is far smaller than during the stock market surge in 2015. Although retail stock account openings have increased recently, the overall scale remains relatively low.

If we examine an index from a state-owned bank that monitors bank-securities transfers, the current level is still low compared to the peak in 2015. Therefore, it is believed that «deposit migration» has not yet formed a significant trend.

In fact, policies guide the stable development of the stock market. Wealth effects and income expectations are influenced by this, leading to relatively rational participation in the stock market by households.

If «deposit migration» occurs, is it favorable or unfavorable for the banking sector?

From the perspective of banks themselves, large banks generally maintain reasonable loan-to-deposit ratios, with no significant deposit shortages. For example, one major state-owned bank currently has a loan-to-deposit ratio of about 70%, lower than the previous level of over 80%; another major state-owned bank has a ratio of around 90%, which is also within a controllable range.

On the contrary, according to recently disclosed bank interim reports, banks’ intermediary business income has achieved good growth, mainly due to the recovery in fund distribution business—as stock market activity increases, investor enthusiasm has noticeably recovered, leading to growth in fund distribution scale. At the same time, previously sluggish trust distribution and insurance distribution businesses are gradually recovering.

Therefore, so-called «deposit migration» has not significantly impacted bank deposit scales. Instead, growth in intermediary income supports the banking sector. If the stock market can maintain a «slow bull» trend, it will be favorable for the banking sector in the long term.

H-Share Banks Offer More Attractive Dividend Yields

In a recent report, it was mentioned that H-share banks are more favored than A-share banks due to differences in dividend yields. Could you elaborate on the sustainability of dividends?

The advantage of H-share banks lies in their dividend yields. After capital injections are completed, some large banks can achieve dividend yields of over 5.5%. Considering the difference in dividend yields, H-share banks are more favored compared to A-share banks (2026 expected averages: 4.1% vs. 4.9%).

From the perspective of fund flows, mainland insurance funds have significantly increased their allocations to H-share bank stocks over the past year, mainly due to low domestic interest rates and strong demand for assets yielding over 4%.

At the same time, bank stocks exhibit excellent Sharpe ratios, providing stable dividend returns with relatively low volatility.

From the revenue perspective, state-owned banks achieved positive revenue growth in the first half of the year, mainly due to increases in intermediary income and bond investment returns. However, joint-stock banks have not yet escaped negative revenue growth.

In the long term, dividend yields remain the core factor supporting the H-share banking sector. A previous report provided a five-year forecast for dividend sustainability: under the baseline scenario, the average dividend yield for H-share bank stocks is expected to be around 4.9%-4.95% in 2025 and remain at about 5% by 2029.

From a long-term perspective, banks are expected to resume revenue growth from 2026, with net interest margins bottoming out and fee income recovering. Over the next five years, major banks’ revenue is expected to maintain positive growth, potentially reaching up to around 5%.

However, not all revenue will be converted into

UBS A-Share Seminar

The UBS A-Share Seminar is not a physical place or cultural site, but rather a financial event. It is an investor conference hosted by the Swiss investment bank UBS, focusing on China’s A-shares, which are stocks of companies incorporated in mainland China and traded on its local exchanges. These seminars provide analysis and insights into the Chinese domestic equity market for institutional and private investors.

Wind Banking Index

I am unable to provide a summary for «Wind Banking Index» as it does not appear to be a recognized place or cultural site. It seems to be a potential financial or economic term, possibly referring to a stock index or a performance indicator for the wind energy sector.

A-share market

The A-share market is China’s primary stock exchange for domestic companies, denominated in yuan and historically restricted to mainland citizens. It was established in the early 1990s following economic reforms and has since grown into one of the world’s largest equity markets. In recent years, it has gradually opened to limited foreign investment through programs like the Stock Connect and QFII schemes.

H-share banks

«H-share banks» refer to Chinese state-owned commercial banks whose shares are listed on the Hong Kong Stock Exchange (HKSE). This designation, «H-share,» was created to facilitate foreign investment in mainland Chinese companies following China’s economic reforms. Major examples include the «Big Four» banks—Bank of China, Industrial and Commercial Bank of China, China Construction Bank, and Agricultural Bank of China—which undertook these listings in the 2000s to raise international capital and improve their corporate governance.

A-share banks

«A-share banks» refer to publicly traded commercial banks listed on China’s domestic stock exchanges, primarily the Shanghai and Shenzhen markets. These institutions, which include major state-owned banks like ICBC and Bank of China, have played a central role in China’s economic development since financial reforms began in the 1980s. Their listings represent a significant part of China’s efforts to modernize its financial system and integrate with global markets.

state-owned bank

A state-owned bank is a financial institution wholly or majority-owned by a national government. They were often established to promote economic development, finance public projects, or provide banking services to underserved populations. Their history is frequently tied to a country’s broader economic policies, such as nationalization programs or initiatives to direct credit to specific industries.

joint-stock banks

Joint-stock banks are financial institutions owned by shareholders who have purchased stock, a model that became prominent during the 19th century to fund large-scale industrial ventures. This structure allowed for the accumulation of significant capital from numerous investors, spreading risk and fueling economic growth. They represent a fundamental shift from private banking and form the basis of the modern commercial banking system.

mainland insurance funds

«Mainland insurance funds» is not a specific place or cultural site, but rather a financial term referring to the collective investment capital managed by insurance companies operating in mainland China. These funds play a significant role in the country’s financial markets, having grown substantially since the economic reforms of the late 20th century. They are primarily invested in domestic stocks, bonds, and infrastructure projects to generate returns while supporting national economic development.