Banks - China: Financial tour takeaways: SOE banks are better positioned

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Banks - China: Financial tour takeaways: SOE banks are better positioned

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Banks - China

Financial tour takeaways: SOE banks are

better positioned

Industry Overview

The K-shape in the banking sector 20 July 2026

We met with all of the major banks as well as several local banks and FinTech firms, Equity

during our financial tour last week. Overall, Big 4 banks are tracking better than China

expected, with mid-to-low single-digit net profit growth and stronger core earnings Banks-Multinational

growth expected in 1H26. Management are generally confident on positive net interest Winnie Wu >>

income and fee growth in 2026, while bond trading and equity revaluation continued to Research Analyst

support 2Q26 trading income. By contrast, most other banks see fewer loan growth Merrill+852 3508Lynch3058(Hong Kong)

opportunities, ongoing margin compression, limited equity gains, and continued winnie.wu@bofa.com

provisioning pressure. Emma Xu >>

Research Analyst

Market share consolidation amid slowing credit growth Merrill+852 3508Lynch8165(Hong Kong)

Total credit growth slowed to 7.0% YoY in 1H26 from 8.0%/8.2% in 2024/25, while loan emma.xu@bofa.com

growth decelerated to 5.2% from 7.0%/6.2%. As regulators prioritize quality over volume Wenqing Han, CFA >>

growth, banks are dialing back loan growth ambitions. Large SOE banks continue to gain ResearchMerrill LynchAnalyst(Hong Kong)

share, outgrowing the system and expanding into mid-sized borrowers as top-tier +852 3508 5032

corporates have better access to cheaper bond financing. Competitive pressure is wenqing.han@bofa.com

intensifying, with mid-sized banks most squeezed, as reflected in their subdued loan and

revenue growth.