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2026-11-05 13:20:10 BofA Securities issued a research report stating that Chinese banks' third-quarter earnings improved, driven by investment gains, but the room for using such gains as a buffer going forward has diminished. Net profit growth for H-share banks improved from a YoY rise of 0.5% in 1H to a 1% increase in the first nine months, while pre-provision operating profit growth accelerated from 9.1% to 10.2%. ABC (01288.HK) and CCB (00939.HK) led the major state-owned banks with YoY earnings growth of 7.1% and 6.6%, respectively, partly supported by investment income, while PSBC (01658.HK) and BANK OF CHINA (03988.HK) lagged behind. Pre-provision operating profit and net profit for the first nine months averaged 80% to 81% of the broker's full-year 2026 forecasts, indicating that most banks are progressing in line with expectations. The broker noted that the sector has cumulatively risen 23.7% year to date, outperforming the MSCI China Index and the H-share financial index by 43 ppts and 21 ppts, respectively. On Oct 22, the broker downgraded HAITIAN FLAV (03288.HK) H-shares and BANK OF CHINA (601988.HK) A-shares to Underperform, reflecting concerns over slower growth in 2027, lower dividend yields and increasingly crowded positioning. Although Chinese banks should remain relatively defensive during market pullbacks, the broker believes absolute upside is limited after the sector recently climbed to historical peaks. ABC (01288.HK), CCB (00939.HK) and ICBC (01398.HK) remain its top picks among large banks. The broker also stated that average loan growth rose 5.2% YoY in the first nine months, with the six major state-owned banks continuing to lead with YoY growth of 5.8% to 7.9%. However, new loans in the third quarter relied heavily on discounted bills. Loan balances at some joint-stock and regional banks contracted by 0% to 1% QoQ. Average NIM fell by another 1 bp QoQ to 1.43% in the third quarter and is expected to remain under pressure in the coming quarters. Fee income growth slowed from a YoY increase of 0.9% in 1H to a 1.7% decline in the first nine months, while other non-interest income was mainly driven by trading and revaluation gains, rising 17% YoY in the first nine months. The average non-performing loan ratio remained stable QoQ at 1.24%, but provision coverage ratios and loan provision ratios declined both QoQ and YoY. (ad/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. | |