China Citic Bank and Bank of China surged by the 10% daily trade limit in morning trading in Shanghai.
Other major state-owned banks, including Industrial and Commercial Bank of China, Agricultural Bank of China and Bank of Communications Co Ltd, were up more than 5%.
The strong performance came after mid-sized lenders China Bohai Bank, China Zheshang Bank and Hengfeng Bank on Friday reduced interest rates on some deposits by between 10 basis points (bps) and 30 bps, following smaller peers.
Beijing last month nudged banks to cut deposit interest rates further, sources said, in the latest effort to channel the country's vast savings pool into spending and more productive investments.
"With the improvement of economic prosperity, policy-led credit expansion is expected to gradually switch to market-oriented financing demand, which will help banks to stabilise interest income," Wang Yifeng, an analyst at Everbright Securities, wrote in a note on Monday.
"Major banks are also benefiting from 'the market valuation system with Chinese characteristics'," he said, referring to a term proposed by top securities regulator Yi Huiman in November when he called for a new model to price state-owned enterprises (SOEs).
State firms' shares have risen sharply since then. On Monday, shares of SOEs also jumped, with the CSI Central SOEs Index up 3.6%.
"Improving the valuation multiple of SOEs has become a policy agenda for China since 4Q22," BofA Securities said in a research note. "We believe the government intends to support the A-share indices so that the stock market can attract more individual and institutional participation."
(Reporting by Ziyi Tang and Ryan Woo; Editing by Jamie Freed)
