China Financials: Audit findings: from risk control to quality growth; immaterial impact on BOC earnings

Research evidence excerpt

China Financials: Audit findings: from risk control to quality growth; immaterial impact on BOC earnings

Update

June 25, 2026 11:54 AM GMT

Morgan Stanley Asia Limited+MChina Financials | Asia Pacific Richard Xu, CFA

Equity Analyst

Audit findings: from risk control Richard.Xu@morganstanley.comBeryl Yang +852 2848-6729

Research Associate

Beryl.Yang@morganstanley.com +852 3963-2224

to quality growth; immaterial Chiyao Huang

Chiyao.Huang@morganstanley.com +852 3963-4624

impact on BOC earnings Chenqian Liu

Chenqian.Liu@morganstanley.com +852 3963-0359

Key Takeaways

The Audit Office published its 2025 Audit Report, a routine report released

annually, covering audit findings for financial institutions, SOE, fiscal, etc.

Audit findings related to Chinese banks and the financial system suggest a focus

shift from quantitative expansion to quality growth since 2025. China Financials

Asia Pacific

Regulators are increasingly scrutinizing quality of growth - boosting loan/deposit Industry View Attractive

growth with circulating funds and noncompliant deposit-taking were criticized.

Risk control remains a recurring theme: hiding NPLs was pointed out several

times; risk digestion for small and mid-size financial institutions was emphasized.

Most issues mentioned in the 2025 Audit Report should have already been

rectified, and we see limited impact on BOC's future earnings after the tax

repayment.

The latest audit findings confirm a focus on quality over quantity for China's

banking sector: Instead of simply supporting credit expansion, the focus now is

more on ensuring genuine and sustainable loan and deposit growth. This is in-line

with the reduced window guidance from regulators on quantitative growth targets