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2026-10-23 12:09:04 JPMorgan published a research report stating that it remains positive on large state-owned Chinese banks ahead of their 3Q results. The broker expects revenue and profit of major state-owned banks to grow 9% YoY and 5% YoY respectively, outperforming joint-stock banks with growth of 5% and a 2% decline respectively. Although H shares of major state-owned banks have risen by an average of about 23% year to date, the dividend yield spread (after tax) over 10-year Chinese government bond yields stands at about 210 bps, close to the 10-year average of 220 bps. Against a backdrop of weak macro expectations and JPMorgan's estimate that dividends per share of major state-owned banks will deliver a CAGR of about 6% during 2025-2028, the broker expects major state-owned banks to continue to Outperform, although there may be short-term profit-taking opportunities. The broker said revenue growth of major state-owned banks in 3Q is expected to be driven by about 10% YoY growth in net interest income, with NIM remaining broadly stable and interest-earning assets recording high single-digit YoY growth. Fee income may remain weak due to a high base effect, but investment income of the five major banks is expected to benefit from fair value gains booked from recent IPO investments such as CXMT (688825.SH). Among joint-stock banks, CM BANK (03968.HK) and CITIC BANK (00998.HK) are expected to post relatively stable revenue and profit trends. JPMorgan downgraded PSBC (01658.HK) from Overweight to Neutral, while maintaining its Dec 2027 TP at HKD5.9. The broker expects PSBC's 3Q revenue and profit to rise 6% YoY and 4% YoY respectively, weaker than its state-owned bank peers. As the bank only obtained a financial asset investment company (AIC) licence in 2025, it missed investments such as CXMT (688825.SH), limiting upside potential for investment income. In addition, the credit cost base in 3Q25 was extremely low at only 7 bps annualized, compared with the three-year average of about 40 bps, which may cause its results to lag behind other major state-owned banks. PSBC's share price has risen about 13% since its 2Q results, outperforming the MSCI China Banks Index by about 7 ppts. JPMorgan believes it is now an appropriate time for profit-taking and suggested investors wait for confirmation that retail asset quality has stabilized or reached an inflection point before seeking a better entry point. JPMorgan also updated its model for CEB BANK (06818.HK), lowering its revenue forecasts for 2026-2028 by about 2% and cutting net profit forecasts by about 16%, 18% and 18% respectively. The broker reduced the Dec 2027 TP for EVERBRIGHT BANK (601818.SH) A shares from RMB2.70 to RMB2.30, and cut the H-share TP from HKD2.60 to HKD2.20, while maintaining an Underweight rating. The broker said EVERBRIGHT BANK's NIM trend is relatively stable, but weak loan growth and soft non-interest income are expected to result in weaker revenue momentum than peers, while pressure on retail asset quality may increase impairments and drag on earnings. (su/da)~ AASTOCKS Financial News Website: www.aastocks.com This article was automatically translated by AI, the Chinese version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. | |