中国银行业（H/A股）2025财年：盈利动能逐步改善

FY25: gradual improvement in earningsmomentum Earnings Review FY25 earnings in line, better revenue outlook in 2026 H-share banks’FY25 net profit growth improved from +0.4%/+0.5% YoY in 1H/9M25 to+0.7% on average, in line with expectations. Core earnings growth was better at 1.5%YoY. For 2026, revenue pressure should ease, amid limited rate cuts and potentiallystronger fee income. However, scope to boost bottom line via lower provisions islimited, as credit costs at SOE banks already declined from ~100bp on average in 2018-20 to ~50bp in 2024-25, and ICBC/CCB/ABC also booked sizeable one-off non-loanwrite-backs in 2025. H-share banks rose by 2.3% YTD. Asdiscussed in our Year Aheadreport, we see limited absolute upside for the sector, but dividend yields at 5-6% isattractive in an RMB appreciation environment, especially amid the macro uncertainties.We upgraded CCB-H from Neutral to Buy on results. CCB/ICBC-H are our top picks in thesector. NIM decline narrowed YoY,loan growth slowerNet interest margin (NIM) fell by 12bp YoY on average (vs -14bp in 2024) to 1.43% in 2025, and slipped 2bp QoQ to 1.40% in 4Q. By 4Q25, NIM of big five state banksdeclined to 1.20-1.27%, some of the lowest in the region. Banks expect margin pressureto further ease in 2026. Loans grew 6% YoY in 2025 (down from +7% YoY in 2024), ledby large banks’at 7-9%, while the growth at MSB/PAB/CEB/CNCB was only 0-3%.Deposit growth accelerated from 5% YoY in 2024 to 6% in 2025, with deposit maturityfurther lengthening YoY, but showing signs of stabilization in 2H25 at some banks. Stronger fee income and trading gainsFee income recovered from -9.4% YoY in 2024 to +6.7% in 2025. Impact of commission rate cuts was absorbed in 2023-24, while agency and wealth management fees posteddouble-digit growth at many banks in 2025. The positive momentum is expected tocontinue into 1Q26. Bond trading and FX gains were also strong, particularly at largebanks. With the better revenue growth, cost-income ratio edged down in 2025. Credit risk concentrated in developer and retail loansAsset quality was stableoverall, with average NPL ratio edged down YoY. NPL ratio in developer loans eased from 4.6% in 2H23 to 4.2% in 2H24, but rebounded to 4.5% in2H25. Mortgage NPL ratio rose further to 0.8% in 2H25, while non-mortgage retail NPLratio reached 2.0% in 2H25. Average credit cost was stable YoY at 65bp in 2025. Withthe write-back of non-loan provisions, total provisions only rose 3.5% YoY. Average NPLand loan reserve coverage declined 9ppt/11bp YoY to 229%/2.7% respectively. Stable payout, sharp CET1 decline at some banksPayout ratiowas largely stable at most banks. With the strong share prices rally, average dividend yield ofthe sector fell from 10% in Jan-24 to 5-6% currently. Average CET1ratio was largely stable YoY at 11.6%, with the boost from capital injection offset by thedecline at CQRB/CMB/ICBC/ABC (-157bp/-70bp/-52bp/-35bp YoY). Details of capitalinjection to ABC/ICBC have not been announced. Share price performance and valuation The H-share banks as a whole rose 2.3% YTD and outperformed the MSCI China/HSI/H-FIN index by 9.6ppt/5.8ppt/6.2ppt, respectively. Weighted average share price of thesector corrected modestly from the recent high in Nov-2025, with valuation at 0.53xP/B, 3.5x P/PPOP, and 5.8x P/E. We see limited absolute share price upside for thesector, but dividend yields at 5-6% is attractive in an RMB appreciation environment,especially amid the macro uncertainties. We upgraded CCB-H from Neutral to Buy onresults. CCB/ICBC-H are our defensive top picks in the sector. Over the past 2 decades, the H-share banks tend to be defensive and have lower betathan non-bank financials and the broader China markets. They underperformed non-bankfinancials and the MSCI China index in the bull markets (eg 2007, 2012, 2017, 2019,2020, 2025), but outperformed in the down or flattish markets (eg 2008, 2014, 2016,2018, 2021, 2022, 2023, 2026YTD). H-share banks’ relative performance vsmarkets Individual banks’ H-share performance in 2025/26YTD Valuation of the H-share bank sector suffered long-term de-rating, but re-rated in thepast 2 years. It recently troughed at 0.34x forward P/B, 3.2x P/E and 1.9x P/PPOP in Jan-2024, similar to the previous low levels at 0.35x P/B, 3.1x P/E and 1.8x P/PPOP in Oct-2022. The sector currently trades at 0.53x forward P/B, 5.8x P/E and 3.5x P/PPOP. Gross dividend yield of the sector declined from nearly 10% in Jan-2024 to 5.4%currently, nearly the lowest level since Jun-2018. The H-share banks generally outperformed their dual-listed A-shares YTD. The A-H sharepremium narrowed from 23% as of end-2025 and to 19% currently. A-H premium (discount) of the dual-listed banks H-share valuation comp MostH-banks’ dividendyieldsat 5-6%areattractive in an RMB appreciation environment. Financials recap Key financial metrics – 2025 Exhibit14: Key financial metrics of the listed banks (2025)2025 financial metrics comparis