CITIC Securities: Bank Valuation Recovery to Above 1x Net Asset Value Is Highly Likely

Recently, the Insurance Asset Management Association of China released the results of the second half of 2025 investor confidence survey for the insurance asset management industry (hereinafter referred to as the "Survey Results"). In terms of major asset allocation, stock investment willingness has significantly increased. According to allocation plans, over 47% of insurance asset management institutions and over 44% of insurance companies ranked stocks as their most preferred major asset for the second half of the year, topping the list across all asset classes. In the survey results for 2025 released earlier this year, bonds were the most preferred major asset for both insurance asset management institutions and insurance companies, with only 13% of insurance asset management institutions and 26% of insurance companies selecting stocks as their primary asset. As policy measures continue to guide insurance funds to increase equity investments, insurance institutions' willingness to allocate to stocks has significantly risen.

According to the Survey Results, dividend-yielding assets and high-dividend-yield assets are among the top five investment areas of greatest interest to insurance institutions. From an industry perspective, the banking sector is the third most favored A-share industry for insurance asset management institutions and the first for insurance companies. Since the second half of 2025, insurance institutions have made five acquisitions of H-share bank stocks, including Hongkang Life Insurance's two acquisitions of Zhengzhou Bank shares, Minsheng Life Insurance's acquisition of China Zheshang Bank shares, and Ping An Life Insurance's acquisitions of Postal Savings Bank and Agricultural Bank of China shares. Given the banking sector's high dividend returns and stable profitability, combined with insurance institutions' analysis of the macroeconomic environment and their own investment preferences, we expect bank stocks to remain one of the most favored sectors for insurance capital.

Looking back, during the two market rallies in 2012 and 2014-15, the banking sector benefited from capital inflows. A review shows that in Q4 2012 and Q4 2014, the banking sector rose by 27.4% and 60.1%, respectively (compared to the CSI 300's gains of 10.0% and 44.2% during the same periods), reflecting the style rotation effect typical of bull markets, which catalyzed the strong performance of bank stocks. Looking ahead, the stratification logic of the stock market may play out over the long term, and the value of bank stocks for institutional investors is expected to continue rising. Long-term allocation funds remain under-allocated, and we expect absolute value to continue being realized.

From a medium-term perspective, the banking sector is still undergoing a process of net asset value revaluation. Coupled with the potential long-term stratification logic of the stock market, the value of bank stocks for institutional investors is expected to keep increasing. Long-term allocation funds remain under-allocated, and we expect absolute value to continue being realized. We believe it is highly likely that bank valuations will recover to above 1x net asset value. If bull market characteristics strengthen, subsequent sector rotation effects will further catalyze the continued outperformance of bank stocks. Therefore, we recommend investors maintain an active allocation strategy. For individual stocks, trading-oriented funds may focus on low-valuation varieties, while allocation-oriented funds may continue to target beta varieties.