2025年第四季度总结：改善的趋势为2026财年净利息收入正增长铺平道路；第四季度业绩超预期为2026财年复苏加速奠定基础

Johnny Xie, CPAResearch Analyst+852-220-36141 4Q beat sets stage for acceleration of recovery in FY26F The banks under our coverage reported a solid end to FY25, with4Q25 attributableprofit beating our estimates by 3%. We believe this sets the stage for a recoveryacceleration in 1Q26 and FY26. While profit saw a seasonal 9% QoQ decline, the3% YoY growth confirms a sustained improvement trend is underway. At the core operational level,pre-provision operating profit (PPOP)growthaccelerated to 3% YoY in 4Q25 (from flat in 3Q25). BOC (+8% YoY) and CCB (+5%YoY) were standout performers. Among our coverage universe, BOC stood out as the top performer, while PSBC'sresults lagged. Looking beyond individual results, we expect the sector-widerecovery to accelerate, driven primarily bya rebound in fee income and moderatingNIM pressure. NIM pressure is moderating, supporting the recovery The pressure on NIM is showing clear signs of moderating, paving the way forhigher top line/ PPOP recovery ahead.While the aggregate NIM for our coveredbanks contracted by 3 bps sequentially in 4Q25, the underlying trend is improving.Notably, BoCOM and CMB achieved quarterly NIM expansion, driven by asignificant reduction in their funding costs (down 8 bps and 9 bps, respectively),which more than offset the drop in their asset yields. Looking ahead, we expect this benefit from lower funding costs to continue asmatured, higher-rate time deposits are repriced. Some banks, such as BOC, arenow guiding that this reduced NIM pressure, combined with steady balance sheetgrowth, could drive a return to positive NII growth in FY26F. That said, we must note that headwinds have not disappeared. Banks still anticipatethat pressure could persist into FY26F due to the possibility of further interest ratecuts and continued soft credit demand. 21 April 2026BanksChina Banks Overall though, we expect the positive impact of lower funding costs to increasinglycounteract the negative pressures. NIM pressure should ease sequentially in1Q26F due to a less challenging comparison for asset yields (given only one LPR cutin May 2025) and the continued benefit from improving funding costs. Fee income recovery momentum is set to continue. Accelerated by strong capitalmarket activities, fee income growth reached 13% YoY in 4Q (though it declined 8%QoQ), primarily driven by wealth management products and mutual fund sales.PSBC and ABC were outstanding outperformers, growing 37% and 31% YoY,respectively. Banks generally anticipate that this fee income recovery momentumshould persist into FY26F, supported by strong demand for wealth managementproducts, asset management, and enhanced settlement business synergies.However, there are potential headwinds, including further reductions in mutualfund sales fee rates and sluggish credit card growth. Other non-interest income increased 17% YoY, primarily due to gains from tradingand investments. Banks anticipate that gradually stabilizing interest rates and bondyields will support trading opportunities in FY26F. Asa result,driven by moderate NII growth recovery and overall businessimprovements, we project banks' revenue growth to accelerate from 2% YoY inFY25 to 4% in FY26F. Balance sheet The banks under our coverage expanded their loan book by 0.4% QoQ (+7.9% YoY),led by CMB at 1.7%, likely due to front-loaded lending. Deposit growth of 1.2% QoQ(+7.5% YoY) outpaced loan growth. The retail-focused banks, CMB and PSBC,gained deposit share with higher-than-peer growth of 3.3% QoQ and 2% QoQ,respectively (compared to the peer average of 1.2% QoQ). This led to animprovement in balance sheet liquidity, with the loan-to-deposit ratio (LDR) sliding0.6 ppts to 80.5%. By weighting the lower funding costs in the interbank market, thedeposit-to-liabilities ratio dropped 0.1 ppts to 75.6%. With slower risk-weightedasset growth in 4Q, the CET-1 increased slightly to 17.8%. Looking into FY26F, most banks anticipate retail loan demand will remain weak.However, corporate loan demand should continue to be a key driver for loan growth,buoyed by a series of government-led projects marking the first year of the 15thFive-Year Plan. Should a sustained recovery in PPI and CPI materialize, we believethis could help the Chinese economy emerge from deflationary pressure, whichwould then likely catalyze a broader recovery in credit demand across both thecorporate and retail sectors.. Asset quality stable The NPL ratio for the banks under our coverage decreased by 2bps YoY (-1bp QoQ)to 1.24%, despite a 6% YoY increase in the gross NPL amount (flat QoQ). Althoughquarterly impairment charges rose 45% YoY, they were 36% lower QoQ than in3Q325. The LLR/NPL coverage ratio declined 6 ppts to 242%, implying anaccelerated clean-up of bad debts. However, PSBC exhibited greater assetdeterioration, likely due to retail loan asset quality issues and more prudentclassification of relief loans, with its NPL ratio edging up 1bp and LLR/NPL ratiodeclini