China Galaxy Securities: Continuing the logic of improving bank fundamentals, continuing to be optimistic about sector allocation values
The Zhitong Finance App learned that China Galaxy Securities released a research report saying that the August financial data continues to confirm the pattern of weak credit, but deposit movements have weakened, compounded by the acceleration of fiscal expenditure. It is concerned about the leveraging effects of subsequent special bonds and the use of new policy financial instruments on credit. Furthermore, recent interim data further released signals of stabilizing interest spreads. The logic of improving bank fundamentals continues, and the overall performance performance is superior to 2025, which favors valuation repair, and continues to be optimistic about the allocation value of the banking sector.
The main views of China Galaxy Securities are as follows:
The growth rate of existing social finance declined again, and the year-on-year decrease in the scale of new social finance reached a new high during the year
Social finance stocks in August were 7.18% year-on-year, down 0.24 percentage points from July and lower than the June growth rate; 1657.7 billion yuan was added in the same month, a year-on-year decrease of 908.3 billion yuan, and the scale of decline was greater than in other months since 2026. There are two reasons for the weakening of social finance in August: first, demand for physical credit continued to be weak, which dragged down the decline in social finance growth, and second, government bond financing declined year-on-year.
Government bonds are still the main source of social finance growth, but the year-on-year increase declined, and the increase in RMB loans continued to shrink
Government bond financing in August was 1009.7 billion yuan, accounting for 61% of the new social finance increase in the same month, but the year-on-year decrease was 357.5 billion yuan; RMB loans only increased by 55.2 billion yuan, a year-on-year decrease of 570.1 billion yuan, reflecting a slow recovery in entity financing needs; corporate bond financing of 271.2 billion yuan, an increase of 137.4 billion yuan over the previous month, and the effect of replacing loans with debt continued. It was mainly affected by the increase in the willingness of enterprises to issue bonds in a low interest rate environment, but the overall increase decreased compared to June-July; the overall increase decreased by 639,300 million yuan compared to June-July; the year-on-year increase of over 183,83 billion yuan in stock financing 100 million yuan ; The total amount of off-balance sheet financing was 37.8 billion yuan, a year-on-year decrease of 178 billion yuan. Of these, undiscounted acceptance notes were 38.2 billion yuan, a sharp decrease of 159.1 billion yuan over the previous year, which is expected to be related to the discount impulse of notes.
Resident-side financing continues to decline, business-side short-term loans have increased negatively, and demand for effective credit is still weak
In August, financial institutions added 60 billion yuan in loans, a year-on-year decrease of 530 billion yuan. Financial institution loan balances were +4.9% year-on-year, down 0.2 percentage points from July. Structurally, residents' financing continues to decline. In August, residential loans decreased by 202.9 billion yuan, a year-on-year decrease of 233.2 billion yuan, and short-term loans decreased by 121.9 billion yuan and 82.2 billion yuan respectively, and a year-on-year decrease of 132.4 billion yuan and 102.2 billion yuan respectively. Residents' willingness to increase leverage continued to be sluggish. In August, the sales area and sales volume of commercial housing declined by 12.1% and 13%, respectively. The short-term performance of the corporate sector was weak, the contribution of medium- to long-term loans increased, and notes continued to have a slight impact. In August, corporate loans increased by 260 billion yuan, a year-on-year decrease of 330 billion yuan. Among them, the increase of 320 billion yuan in medium- and long-term loans was the main support, but there was a year-on-year decrease of 150 billion yuan, a year-on-year decrease of 160 billion yuan, a year-on-year decrease of 230 billion yuan, note financing of 100 billion yuan, and a slight increase of 46.9 billion yuan over the previous year. There is still a certain amount of note impulse behavior. Overall, insufficient demand for effective credit is still a core constraint on current credit expansion.
The deposit moving process has slowed down, and the consumption of fiscal deposits has increased
In August, M1 was +4.1% YoY, up 0.1 percentage points from July, M2 was +7.5% YoY, down 0.2 percentage points. The M1-M2 scissor gap narrowed to -3.4 percentage points, and the degree of capital activation improved marginally. On the deposit side, at the end of August, financial institutions' RMB deposits were +7.7% year-on-year, and the growth rate was lower than in July. Among them, residents' deposits increased by only 40 billion yuan and corporate deposits increased by 280 billion yuan, which was fixed from negative growth in July. The growth rates of non-bank deposits and fiscal deposits showed signs of weakening. The growth rate of non-bank deposits and fiscal deposits increased by 560 billion yuan and 110 billion yuan respectively in August, and the year-on-year decrease of 620 billion yuan and 80 billion yuan, respectively. Deposit moves are still ongoing, but the pace of fiscal expenditure has accelerated and funds disbursed to entities.
Risk warning: the risk that economic growth falls short of expectations and that asset quality deteriorates due to poor retail exposure; the risk of interest spreads being pressured by falling interest rates.