(Yicai) Dec. 23 -- Five publicly listed Chinese lenders, including Shanghai Pudong Development Bank and China Minsheng Bank, have announced equity increases by major shareholders since the start of the month, reflecting optimism about the prospects for banking stocks.

SPD’s largest shareholder, Shanghai State-Owned Assets Operation, a unit of Shanghai International Group, has increased its stake by almost 7.6 million shares, accounting for 0.03 percent of the bank's total common stock, the Shanghai-based lender said on Dec. 19.

China Minsheng Bank, Bank of Chengdu, Bank of Suzhou, and Shanghai Rural Commercial Bank also revealed plans by key investors to raise their equity holdings in December. Over the course of this year, 26 publicly listed banks have seen similar moves.

The underlying reason for the year-end increases is optimism about the outlook for banking stocks heading into next year, analysts said. 

Banking stocks have performed well this year. The Chinese bank index had climbed nearly 38 percent as of Dec. 20, compared with a 12.7 percent gain for the benchmark CSI 300 Index, according to Wind Information data.

Expectations for monetary policy easing next year could drive market interest rates lower in 2025, providing support for high-dividend stocks such as bank shares, said Guo Yi, a banking industry analyst at Wanlian Securities.

China’s top leadership pledged earlier this month to embrace a “moderately loose” monetary policy next year, shifting from the “prudent” stance in place since 2011.

Other factors may also be at play, according to industry insiders. The authorities have asked listed companies to raise their price-to-book ratios, a financial indicator that compares a company’s market value to its book value. For example, SPD’s price-to-book ratio has been below 0.5 percent for three years.

Convertible bonds issued by some banks to bolster their core capital are also approaching maturity. Given the prolonged weakness in bank stocks, bondholders are likely to cash out at maturity for a profit. So shareholders are listing their stakes to encourage conversion, which would boost Tier 1 core capital.

But some analysts also caution about potential risks in the market. Ma Kunpeng, chief banking analyst at Citic Construction Securities, pointed out that in the medium-to-long term, risks from unaddressed non-performing assets still need to be resolved. Monitoring leading asset quality indicators for listed banks will remain crucial, he said.

Editor: Futura Costaglione