Bank of America Securities stated that H-share listed Chinese banks saw an improvement in average net profit growth, rising to 1.1% year-on-year in the first quarter from 0.7% last year. The firm maintains a constructive outlook on the sector, citing robust dividend yields of around 5%, a bottoming-out of revenue growth, defensive characteristics, and regulatory moats that provide protection against AI-related disruptions. The top picks are Industrial and Commercial Bank of China (01398) and China Construction Bank (00939), while China Merchants Bank (03968) and Postal Savings Bank (01658) are the least favored. Pre-provision operating profit (PPOP) saw a significant average acceleration to 9.2% year-on-year during the period, compared to 1.5% last year. Among individual banks, Bank of China (03988) and Agricultural Bank of China (01288) reported net profit growth of 4% to 4.5% year-on-year, while Postal Savings Bank, China Construction Bank, and Agricultural Bank of China recorded PPOP growth between 13% and 19%. The average net interest margin rebounded by 3 basis points quarter-on-quarter to 1.43%, representing a major positive surprise. Net interest income increased by 2.8% quarter-on-quarter. Specifically, China Construction Bank, China Minsheng Bank (01988), Chongqing Rural Commercial Bank (03618), and Agricultural Bank of China saw their net interest margins rise by 6 to 9 basis points quarter-on-quarter, whereas China Merchants Bank and China CITIC Bank (00998) experienced declines of 2 to 3 basis points.
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