The Zhitong Finance App learned that Bank of America Securities released a research report saying that the average net profit growth rate of Bank H shares in the first half of the year improved from 1.1% year-on-year increase in the first quarter to 1.7%. The pre-provision profit growth rate increased from 1.5% in FY2025 to 9.2% in the first quarter, and is expected to remain strong in the first half of the year. The bank continues to be optimistic about large banks due to their high profit visibility and attractive dividend yields.
The bank upgraded the agricultural bank (01288) H share rating from “neutral” to “buy”, China Merchants Bank (600036.SH) A share rating from “outperforming the market” to “buy”, agricultural bank A share (601288.SH) from “outperforming the market” to “neutral”, and downgraded CCB (601939.SH) A share from buying to neutral. ICBC (01398) /Agricultural Bank/China Construction Bank (00939) H shares are the bank's preferred state-owned bank stocks, and China CITIC Bank (00998) /Industrial Bank (601166.SH) /Bank of Ningbo (002142.SZ) /Bank of Jiangsu (600919.SH) are the bank's preferred small and medium-sized banks.
According to the report, the growth rate of industry loans slowed from 6.2% year-on-year growth in December 2025 to 5.7% and 5.2% year-on-year increases in March and June 2026, respectively, and was mainly hampered by continued weakness in credit demand. The loan structure is also becoming more unbalanced, with retail loans accounting for negative 3% of new loans in the first half of the year, compared to 3%/15% in 2025/2024, respectively. Mortgage loans continue to shrink, and banks are also becoming more cautious about personal business loans and consumer loans, due to the high rate of non-performing loans. The People's Bank of China recently emphasized that credit quality is superior to quantitative growth, which also shows that the momentum for overall expansion is limited.
According to the report, bank net interest spreads rose by 3 basis points quarterly in the first quarter and are expected to remain stable in the next quarter. Since most of the benefits of deposit repricing will be realized in 2026, net interest spreads are likely to be put under pressure again in 2027, as the return on bond reinvestment falls and the asset portfolio shifts to bonds/corporate loans, dragging down return on assets.