The Zhitong Finance App learned that CITIC Construction Investment released a research report saying that 1H26 listed banks had a large single-digit increase in revenue, stable profits and a small single-digit release, and the trend was positive. Credit grew by a large single digit, and the decline on the asset side slowed down and debt costs were optimized, net interest spreads stabilized marginally, and net interest income accelerated. Revenue grew steadily by a small single digit, and the trend in the core revenue capacity of listed banks is improving. There is a certain differentiation in other non-interest rates, mainly due to different options for cashing out floating profits. Asset quality appears to be stable, real estate risks are being cleared at an accelerated pace, and retail risks are still naturally exposed. Some banks chose to expedite the elimination of real estate risks during the window period when policies have not declined and financial resources are relatively abundant, which is beneficial to future performance flexibility. Some banks have implemented mid-term dividend plans, and the dividend rate of major state-owned banks has been uniformly increased by 1 pct, and dividend attributes have been further improved. Looking ahead to the whole year, the revenue and profits of listed banks are expected to continue their positive trend, and fundamentals will stabilize. Currently, the banking sector is dominated by the hedging market. It is recommended to choose targets that balance excellent fundamentals, maintain industry leadership, and have solid dividend ratios.
CITIC Construction Investment's main views are as follows:
The revenue of 1H26 listed banks maintained large single-digit growth, interest margins stabilized, net interest income continued to accelerate, small single-digit growth, improved core revenue margins, and other non-interest differentiation was the biggest difference: 1H26 listed banks' revenue increased 7.4% year-on-year, maintaining large single-digit growth. Among them, China's banks, stock banks, urban commercial banks, and agricultural commercial banks increased 9.4%, 2.8%, 8.1%, and 2.0% year-on-year respectively. Specifically, net interest income increased by 8.4% year on year, and the growth rate continued to rise. Mainly when the scale maintained steady growth, interest spreads stabilized marginally due to a drop in deposit-side cost pressure. The capital market continued to heat up, the wealth management business performed well, and revenue grew by a small single digit. The core revenue of listed banks improved marginally. The core revenue of 1H26 listed banks increased 7.1% year on year, up 0.2 pct from the first quarter. Among them, the core revenue of Chinese banks, stock banks, urban commercial banks, and agricultural commercial banks increased 7.4%, 4.0%, 14.0%, and 7.6% year-on-year respectively. Other non-interest rates were affected by last year's high base, and there is some pressure. However, changes in the fair value of some bank bonds have improved markedly, and some banks have continued to cash out surpluses, and the overall impact on revenue is limited. There are also some banks that did not choose to continue to cash out floating profits when their superior net interest income performance supports revenue, so there are differences in other non-interest performance.
Against the backdrop of a small single-digit increase in 1H26 profits and a clear recovery in revenue, some banks have begun to take the initiative to clear out bad debts and increase safety cushions. Net profit attributable to mother of 1H26 listed banks increased 3.0% year over year. Among them, Chinese banks, urban commercial banks, and agricultural commercial banks increased 4.4%, 7.2%, and 3.8% year over year, while stock banks decreased 2.6% year over year, which is under relative pressure. The profit growth rates of state-owned banks and agricultural commercial banks increased by 0.77 pct and 0.06 pct, respectively, compared to 1q26, while stock banks and urban commercial banks decreased by 2.17 pct and 0.10 pct compared to 1q26. In terms of performance attribution, in addition, the decline in the cost-to-revenue ratio, and other non-interest and interim income also contributed positively to net profit of 2.2%, 1.4%, and 0.1%, respectively. Looking at negative contribution factors, increasing provisions and narrowing interest spreads are still the main drag items. Negative contributions to profit growth rates of 4.3% and 4.0%, respectively. The impact of narrowing interest spreads is gradually weakening, but the increase in provisions in the first half of the year clearly delayed the release of profits. It is expected that in a situation where revenue trends are improving, some banks will take the initiative to confirm poor clean-up and accrual provisions before risk-related policies decline.
The rate of table expansion has declined: demand for effective credit is still insufficient, and credit growth from banks in some high-quality regions is relatively good. Credit increases are basically all contributions to the public sector. Sectors involving government and manufacturing are the main directions: the total assets of 1H26 listed banks increased 7.8% year on year, and the growth rate decreased by 1.5 pct from 1q26 month on month. The loan size increased 6.5% year over year, and the growth rate decreased slightly by 0.5 pct from 1q26. Credit investment was mainly for public loans. Demand for retail credit did not improve, and there was a slight increase in notes in the second quarter. Public credit is still the main loan investment for listed banks in fields related to politics, major infrastructure, and the “Five Big Financial Articles”. Project reserves are abundant, and demand for credit in regions such as Jiangzhe, Cheng-Chongqing, and the Pearl River Delta is still relatively strong. 1H26 listed banks accounted for 90.5%, 1.6%, and 7.9% of the increase in public loans, retail loans, and notes discounts, respectively.
The deposit growth rate declined month-on-month, and the regularization trend slowed: the debt and deposit size of 1H26 listed banks increased by 8.1% and 6.2% year-on-year respectively, down 1.4 pct and 0.5 pct respectively from 1q26. Among them, the deposit size of Chinese banks, stock banks, urban commercial banks, and agricultural commercial banks increased by 6.2%, 4.3%, 10.0%, and 7.0%, respectively, over the same period last year. Deposits accounted for 71.0% of total liabilities, down 0.6 pct from quarter to quarter. The share of interbank debt in the broad sense increased by 0.1 pct from quarter to quarter. It is expected that deposits will “move” mainly as the capital market continues to heat up, but it will also flow back to bank accounts through interbank debt. In terms of deposit structure, the share of current deposits in 1h26 listed banks decreased by 0.5pct to 36.4% compared to the beginning of the year. The trend of deposit fixed-term deposits continued, but the pace gradually slowed down.
Under asset-side declines and debt cost optimization, the net interest margin basically stabilized: the net interest spread (estimated value) of 2Q26 listed banks fell slightly by 1 bp to 1.49% from quarter to quarter. Among them, the net interest spreads of China's banks, stock banks, urban commercial banks, and agricultural commercial banks changed quarterly by -1 bp, -1 bp, +2 bps, -4 bps to 1.33%, 1.55%, 1.53%, 1.52%. The return on assets of 1H26 listed banks fell 15 bps to 2.98% month-on-month compared to 2H25. LPR has remained on hold since this year. On the other hand, the regulatory side's direction of easing competitive pressure on the bank's asset side is clear. Currently, there is relatively limited room for loan interest rates to continue to decline sharply. The debt costs of 1H26 listed banks fell 16 bps to 1.53% month-on-month compared to 2H25. Benefiting from the gradual maturity repricing of time deposits and the bank's independent deposit structure optimization, debt costs were drastically reduced, which strongly underpinned interest spreads.
Earnings grew steadily in small single digits, and there were differences in other non-interest income: the non-interest income of banks listed on 1H26 increased 5.2% year on year, and the growth rate decreased by 3.3 pct from 1q26. Among them, the middle income increased 1% year on year. In a moderately loose monetary policy environment, AUM has maintained a relatively rapid growth rate. It is expected that the scale of financial management will rise quarterly, strongly supporting bank sales and management business. Other non-interest income increased 8.8% year on year. Other non-interest income from China's banks, stock banks, urban commercial banks, and agricultural commercial banks changed by +22.0%, -2.3%, -11.4%, and -16.6%, respectively. There is some differentiation in other non-interest income. Since most banks in 1H25 sell AC accounts or OCI accounts to cash out surpluses to smooth performance, there is a high base effect. Interest rates in the 1H25 bond market have risen sharply, and since the beginning of this year, interest rates in the bond market have basically fluctuated at a low level. Bond prices are higher than the same period last year. As a result, the fair value fluctuation pressure on most banks has eased, hedging some of the effects of high base figures to a certain extent. On this basis, major state-owned banks continue to choose to cash out floating profits, so other non-interest rates have maintained high growth, which strongly supports revenue. However, when the core revenue trend is improving, some urban agricultural commercial banks chose to reduce the cashing of floating profits. As a result, other non-interest non-interest growth was negative year-on-year, causing a certain drag. It is expected that there will be some improvement in the second half of the year.
Asset quality appeared to be stable, and the rate of bad generation increased slightly. Public real estate risks have been cleared at an accelerated pace, and retail risks are still being exposed in the industry: the non-performing rate of 2Q26 listed banks remained flat at 1.22% month-on-month, provision coverage fell 0.4 pct to 233% quarterly, and overall risk offsetting capacity was stable. The 2Q26 listed banks added back write-off bad generation rate of 0.81%. The quarterly increase was 2 bps, the year-on-year increase was 4 bps, and there was a slight increase in bad generation. In terms of key areas, the non-performing ratio of public loans continues to decline, and the quality of public loan assets related to real enterprises such as the manufacturing industry remains at a good level. Public real estate is still the core pressure point, and the non-performing rate remains high. Some banks chose to speed up the elimination of real estate risks during the window period when policies have not yet declined and financial resources are relatively abundant. Under the law of large numbers, retail loans are exposed quickly, and settlement and collection take time. Therefore, retail and minor risks are still exposed in an industry and trend, and improvements in asset quality still need to wait for economic recovery.
Mid-term dividends: Currently, 17 banks have issued clear mid-term dividend plans. Some banks' proposals for mid-term dividends in '26 have been reviewed by shareholders' meetings, but the specific dividend plans have not yet been disclosed. Among them, the dividend rates of the six major state-owned banks all increased by 1 pct to 31% (according to the net profit ratio), and the dividend attributes were further increased. CMB, Shanghai-Nong, Shanghai, CITIC, and Chengdu have medium-term dividend rates of over 30%, which is not much different from the 25-year dividend rate; Minsheng, Changsha, Ping An, and Ningbo's mid-term dividend rates are slightly below the 25-year level. Judging from the actual pace of implementation of mid-year dividends in 2025, dividends are mainly concentrated from December to January of the following year, and it is expected that the 2026 mid-term dividends will continue at this pace.
Looking ahead to the whole year: scale will remain stable and grow in large single digits; the year-on-year decline in interest spreads will narrow and the margins will gradually stabilize; revenue will pick up; and revenue can continue the current good trend. Credit costs have risen slightly, and profits have maintained steady growth in small single digits. 1) In terms of scale, there has been no significant recovery in credit demand, and credit growth is expected to remain flat or increase slightly year-on-year throughout the year. From a structural point of view, politics, five major articles, etc. are still the main directions for the public sector. 2) The decline in interest spreads narrowed year on year, and margins gradually stabilized. LPR remained on hold in '26, and the trend of “anti-internal circulation” on the regulatory side was clear, and the decline in interest rates on the asset side gradually slowed down. At the same time, deposit listing interest rates continue to decline. After time deposits are repriced at maturity, the cost of debt will be reduced, and the decline in interest spreads is expected to gradually narrow. 3) Monetary easing and capital markets are active. Earnings such as income from big wealth management can continue to pick up, and revenue growth rates improve. 4) The bond market remains volatile at a low level. The high base effect gradually subsided in the second half of the year, and other non-interest pressures eased somewhat. Other non-interest income had a limited impact on revenue in 2026, but volatility and interbank differences were significant. 5) In terms of asset quality, it is expected that the non-performing rate and provision coverage ratio will remain within a stable and reasonable range, that bad public real estate will continue to be cleared, and the asset quality of retail and small and micro credit is still being exposed. In 2026, some core revenue trends are improving, and banks that “have spare time” in terms of performance may use the 16 Financial Regulations to mitigate the window period where bank risk policies have not yet declined, confirm early settlement problems, and increase credit cost accruals.