On July 30, the banking sector showed strong resilience against broader market trends, with all 42 listed banks on China's A-share market closing the trading session in positive territory.
Shanghai Pudong Development Bank and Shanghai Rural Commercial Bank posted gains exceeding 4%. Huaxia Bank, Chongqing Rural Commercial Bank, Bank of Communications, China Construction Bank, Bank of Ningbo, and Ruifeng Bank all saw increases of more than 3%. Additionally, Industrial and Commercial Bank of China and China Construction Bank hit new intraday highs during the session, closing at 8.15 yuan and 10.97 yuan per share, respectively.
Data from East Money Choice shows that among the various categories of listed banks, the rural commercial bank sub-sector led with a 3.22% gain, followed by state-owned large banks at 2.67%, joint-stock banks at 2.44%, and city commercial banks at 2.14%.
A senior financial analyst at Botong Consulting noted that the cumulative effect of multiple rounds of deposit rate cuts is driving down banks' liability costs. The net interest margin is nearing its trough, and improved profitability for listed banks in the first half of the year provides solid support for the sector's rally. Meanwhile, the ongoing cleanup of non-performing assets in real estate and steady progress in local government debt resolution are keeping overall non-performing loan ratios low and provision coverage ratios adequate, easing asset-side risk pressures.
The high-dividend nature of the banking sector has become increasingly attractive in the current market environment. Long-term funds from insurance companies and social security funds continue to flow in, and share buybacks or stake increases by major shareholders and executives of several banks have further solidified the sector's valuation floor.
Currently, all 42 A-share listed banks are trading below their book value, with price-to-book ratios of less than 1. In response, listed banks are placing significant emphasis on market value management. Several institutions have published valuation improvement plans and introduced a series of measures to enhance their market valuation. China Everbright Bank, China CITIC Bank, and China Merchants Bank have each established special market value management teams to coordinate and ensure the effective implementation of these initiatives, aiming to protect company value and shareholder interests.
One bank representative stated that a company's stock price is influenced by a variety of factors, including operational fundamentals, the macroeconomy, sector performance, and market sentiment. The bank will continue to focus on improving management and investor communication to drive valuation recovery.
Looking ahead, the analyst expects the overall trend of valuation recovery for bank stocks to continue, given that all A-share listed banks are trading at historically low valuation levels, providing a substantial margin of safety. As interim results are released, the logic of earnings recovery will be further validated. However, sector divergence will persist. State-owned large banks, known for their stable operations and consistent dividend payouts, along with high-quality regional banks benefiting from local economic vitality and stronger earnings flexibility, are expected to remain favored by investors. Short-term stock prices may fluctuate with market sentiment, but the fundamental improvement trend remains unchanged, and valuations will gradually revert toward a reasonable range over the long term.
A research note from Huachuang Securities suggests that 2026 is likely to be another year of systematic valuation recovery for the banking sector. High dividends and low valuations will continue to be the sector's hallmark, especially amid declining risk-free interest rates, making bank stocks an attractive bond-like asset for steady capital. Furthermore, as net interest margins stabilize, regional credit demand recovers, and non-interest income grows, some high-quality banks will demonstrate strong earnings flexibility, potentially shifting market valuation logic from a price-to-book basis to a price-to-earnings basis.