Capital Inflows and High Dividends Drive the Banking Sector: ICBC and CCB Hit Record Highs, China Merchants Bank Returns to Trillion-Yuan Market Cap

On July 30, the A-share market as a whole entered an adjustment phase, while the banking sector strengthened against the trend.

By the close of trading, the share prices of ICBC and CCB closed at 8.15 yuan/share and 10.97 yuan/share respectively, both hitting fresh historical highs; meanwhile, China Merchants Bank, which had just returned to the trillion-yuan market capitalization threshold in the previous trading session, continued its upward momentum.

In addition to large-scale banks and leading joint-stock commercial banks, other institutions such as Shanghai Pudong Development Bank, Shanghai Rural Commercial Bank, and Huaxia Bank also ranked among the top gainers during the session.

Since July, the Wind Banking Index has risen by 14.95%. After experiencing a phased correction in the first half of the year, the sector as a whole has shown a clear rebound trend in the second half.

Market analysts generally believe that the strong performance of banking stocks in this round stems from the reallocation of capital following a shift in market focus, supported by the solid fundamentals of listed banks and their measures to "support valuations."

On one hand, the high-dividend attribute constitutes the foundation of the banking sector.

During the recently concluded 2025 dividend season, 41 out of 42 A-share listed banks distributed a total of 645.637 billion yuan in cash dividends, an year-on-year increase of approximately 13.5 billion yuan. The total dividend amount has hit record highs for three consecutive years, with stable cash returns providing a safe haven for defensive capital.

On the other hand, the wave of shareholding increases and the establishment of long-term mechanisms for market capitalization management have further stabilized market expectations.

Since 2026, A-share listed banks have seen intensive share purchases by shareholders and management. By the end of July, more than ten banks, including Bank of Shanghai, Bank of Nanjing, Changshu Rural Commercial Bank, and Postal Savings Bank of China, had publicly disclosed the progress of their respective share purchase implementations;

At the same time, market capitalization management for listed banks is shifting from previous passive operations to a stage of building long-term mechanisms driven by corporate management and coordinated across multiple departments.

Recently, several listed banks, including China Everbright Bank, China Merchants Bank, and China CITIC Bank, have established "Market Capitalization Management Teams." Led by management, these teams coordinate related work and regularly convey market demands into internal operational strategies and dividend decisions;

Institutions such as ICBC, Shanghai Pudong Development Bank, Huaxia Bank, and Bank of Jiangsu have also successively introduced "Market Capitalization Management Systems" or "Valuation Enhancement Plans," promoting the institutionalization of market capitalization management by clarifying paths such as cash dividends, investor relations management, and information disclosure.

Although the secondary market has long been in a state of trading "below net asset value," this series of institutional arrangements and share purchase measures may help banks build a closed loop of "value creation – value transmission – value realization."

Movements in capital flows reflect a shift in investors' risk appetite.

Some analytical institutions pointed out that when market volatility increases and risk appetite declines, low-risk-preference capital tends to concentrate on high-quality targets with resilient fundamentals and stable dividends. This allocation initially manifested in some regional city commercial banks and rural commercial banks with better performance, and then gradually spread to state-owned large banks and high-quality joint-stock commercial banks with better liquidity and higher stability.

Regarding future performance, a research report by CITIC Securities suggests that in the second half of the year, the banking sector is expected to be revalued from being purely a "high-dividend defensive asset" to a "high-certainty equity asset."

However, the divergence trend within the sector will continue: state-owned large banks are expected to see sustained improvement in profitability, the revenue recovery of joint-stock commercial banks is relatively slower, and the performance divergence of city commercial banks and rural commercial banks depends more on the regional economic environment and the performance of non-interest income.