Zhongtai Securities released a research report stating that in the first quarter, passive funds and Northbound funds flowed out of the banking sector, while active funds saw a slight inflow. During a market downturn, bank stocks with high dividends will continue to be attractive. The stability and sustainability of bank stocks are still favored. There are two main investment themes for bank stocks: one is regional banks with strong certainty, including Jiangsu, Shanghai, Chengdu-Chongqing, Shandong, and Fujian, with a focus on recommending Jiangsu Bank, Hangzhou Bank, Chongqing Rural Commercial Bank, and regional banks in Nanjing, Chengdu, Shanghai, and Shandong. The second theme is large banks with high dividends, including the big six (such as Agricultural Bank of China, China Construction Bank, and Industrial and Commercial Bank of China) and listed banks like China Merchants Bank, Industrial Bank, and CITIC Bank. The main points of Zhongtai Securities are as follows: In the first quarter of 2026, the overall funding situation of passive funds and Northbound funds flowed out of the banking sector, while active funds saw a small inflow. The net inflow scale of passive/active/Northbound funds in the first quarter of 2026 was -106.82/13.4/-78.0 billion yuan, with the net change scale accounting for 6.22%/0.08%/0.45% of the fourth-quarter trading volume, totaling -113.29 billion yuan. The proportion of bank stock holdings to the free float market value of banks by various institutions currently ranks as Northbound funds (5.70%) > passive funds (3.31%) > active funds (1.12%), compared to 5.88%, 6.68%, 1.01% in the fourth quarter of 2025. Active funds: The proportion of holdings increased by 0.15 percentage points to 2.23% compared to the fourth quarter of 2025. The main contributing factor to the change in positions was the decline in the banking sector contributing -0.07%, with the change in positions contributing +0.22%. (1) At the industry level, the market value of bank stocks held by active funds at the end of the first quarter was 32.155 billion yuan, an increase of 5.1% over the previous quarter, with a holding ratio of 2.23%, up by 0.15% compared to 2.08% in the fourth quarter of 2025. However, the sector as a whole is still underweight, with the underweight level compared to the benchmark dropped to -3.94%. It is expected that the sector's holding ratio may increase in the second quarter due to the improvement in performance. (2) At the individual stock level, A. Holding ratio: As of the end of the first quarter of 2026, the top five bank stocks held by active funds (including closed-end funds) were China Merchants Bank, Ningbo Bank, Jiangsu Bank, Industrial and Commercial Bank, and Chongqing Rural Commercial Bank, accounting for 0.44%, 0.43%, 0.16%, 0.15%, and 0.13% of the total market value of bank stocks held by active funds. B. Increase in positions: The top five banks that increased their positions were Ningbo (+0.07%), Ping An (+0.06%), Jiangsu (+0.04%), Minsheng (+0.03%), and Industrial and Commercial Bank (+0.03%). C. Proportion of holdings to the free float market value of listed banks: The top five bank stocks are Ningbo, Chongqing Rural Commercial Bank, Changsha Bank, Changshu Bank, and Qilu Bank, accounting for 5.84%, 4.94%, 2.78%, 2.48%, and 2.38% of the total market value of bank's freely tradable shares. D. Fund flows: The top five banks with significant net inflows are Ping An, Ningbo Bank, Jiangsu Bank, Minsheng Bank, and Agricultural Bank, with net inflows of 8.00, 5.00, 4.81, 4.64, and 4.32 billion yuan, respectively. Passive funds: Affected by the shrinking of management scale, the total net outflow scale of funds was 106.8 billion yuan. (1) Scale and proportion of ETF funds in bank stocks: In the first quarter of 2026, the scale of ETF funds tracking the SSE 300, CSI 500, SSE 50, CSI 500, and CSI 1000 decreased by 104.25 billion yuan, with passive funds holding a total market value of bank stocks of 94.73 billion yuan at the end of the first quarter, a decrease of 53.0% from the end of the fourth quarter, accounting for 3.31% of the total market value of freely tradable shares of listed banks, down by 3.37 percentage points from the end of the fourth quarter of 2025. (2) Increase/decrease in holdings of bank stocks by passive funds: In the first quarter of 2026, bank stocks were in a state of net outflow for passive funds. The net outflow scale for passive funds in the first quarter of 2026 was 106.82 billion yuan, with large outflows for China Merchants Bank, Industrial Bank, Industrial and Commercial Bank, and Agricultural Bank, of -21.32, -15.91, -10.30, and -9.05 billion yuan respectively (broad-based weighted varieties). Northbound funds: Overall, net outflows from the banking sector in the first quarter were 78.0 billion yuan. (1) Overall holding market value: At the end of the first quarter of 2026, Northbound funds held a total market value of bank stocks of 163.27 billion yuan, down by 7.89% compared to the end of the fourth quarter of 2025, with the total market value of bank stocks held accounting for 5.70% of the free float market value of listed banks, down by 0.17 percentage points from the end of the previous quarter. (2) Looking at the increase/decrease in holdings of bank stocks by Northbound funds, there was an overall net outflow in the first quarter, with a net outflow scale of 78.0 billion yuan. Among individual stocks, the banks with significant net inflows in the first quarter of 2026 were Huaxia Bank, China Construction Bank, and Chongqing Rural Commercial Bank, with inflows of 12.07, 5.71, and 2.93 billion yuan respectively.