Assessing the Impact of Structural Monetary and Fiscal Policies on Banks

China policymakers announced a combination of targeted fiscal and monetary easing measures on September 29, including a 25bp cut in the PSL (pledged supplementary lending) rate, an expansion of PSL support to the "Six Networks" projects, higher quotas for various relending programs, and the first-ever mortgage interest subsidy for eligible first-home purchases. From a banking perspective, we believe this latest round of structural monetary and fiscal policies can modestly improve credit demand, maintain ample interbank liquidity, and mitigate mortgage asset quality risks. However, it is unlikely to drive a significant recovery in credit demand or meaningfully accelerate mortgage loan growth. Overall, the measures are supportive of banking system NIM stability and asset quality, while helping reduce tail risks, particularly for smaller and mid-sized banks. We maintain our Buy ratings on BOC, CCB, and BONB.