1H26 preview: expect continued improvement in profit growth

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1H26 preview: expect continued improvement in profit growth

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Banks - China (H/A)

1H26 preview: expect continued

improvement in profit growth

Rating Change

K-shaped earnings divergence in 1H26 27 July 2026

H-share banks’ average net profit growth is expected to improve from +1.1% YoY in Equity

1Q26 to +1.7% in 1H. Pre-provision profit (PPOP) growth rose from +1.5% in FY25 to China

+9.2% in 1Q26 and should remain robust in 1H. As highlighted in our recent note on the Banks-Multinational

sector’s K-shaped divergence (link), the Big Four enjoy particularly strong revenue

Winnie Wu >>

momentum, supported by their long-term time deposit re-pricing down, bond trading Research Analyst

gains, and equity investment income. Banks’ stock performance has diverged YTD, Merrill+852 3508Lynch3058(Hong Kong)

following the broad-based re-rating and outperformance in 2024-25. We continue to winnie.wu@bofa.com

favor the big banks for their strong earnings visibility and attractive dividend yields. Emma Xu >>

Upgraded ABC-H from Neutral to Buy, CMB-A from Underperform to Buy, ABC-A from ResearchMerrill LynchAnalyst(Hong Kong)

Underperform to Neutral, and cut CCB-A from Buy to Neutral. ICBC/ABC-H/CCB-H are +852 3508 8165

emma.xu@bofa.com

our preferred SOE banks, CNCB-H/CIB/BONB/BOJS are our top mid/small-cap picks.

Wenqing Han, CFA >>

Loan growth further decelerates ResearchMerrill LynchAnalyst(Hong Kong)

Sector loan growth softened from 6.2% YoY in Dec-25 to 5.7%/5.2% in Mar/Jun-26, +852 3508 5032

wenqing.han@bofa.com

amid persistently weak credit demand. The loan mix also became more imbalanced, with

retail loans accounting for -3% of new loans in 1H26, vs. 3%/15% in 2025/24. Mortgage

continued to decline, while banks are getting cautious on personal business and