Wrapup 2: China’s largest five banks report strongest first-half profit since height of property crash

Bank of China

28/08/2026 12:48

Adds context in paragraph 3, comments from management calls in paragraphs 7-11
Non-performing loan ratios hold steady for most
Net interest margins increase for three lenders
Analysts say the increase could be short-lived
Smaller banks perform less well
By Ziyi Tang and Selena Li
BEIJING/HONG KONG, Aug 28 (Reuters) - China's five largest banks have reported profit growth of between 3% and 5% in the first half, as falling deposit costs eased pressure on lending margins despite weak credit demand.
For four of the biggest banks, first-half net profit growth was the highest since 2022 over the same period and for the Bank of Communications it was the highest since 2023.
The rise was driven partly by a repricing of matured higher-cost deposits that began at the start of the year. Lower costs give lenders scope to recover from a prolonged margin squeeze as domestic loan demand has been subdued by a slowing economy.
Industrial and Commercial Bank of China 601398.SS, 1398.HK, the world's largest lender by assets, reported on Friday a 3.3% rise in first-half net profit, while Bank of China 601988.SS, 3988.HK logged the largest percentage growth among the big five at 5.1% over the same period.
Agricultural Bank of China 1288.HK 601288.SS, China Construction Bank Corp 601939.SS, 0939.HK and Bank of Communications 601328.SS, 3328.HK reported 4.9%, 4.6% and 4% net profit in the first-half, respectively.
     
DEPOSIT RELIEF IS EXPECTED TO FADE
Official data for the wider commercial sector released earlier this month showed the average improvement in net interest margins had risen one basis point to 1.41% in the second quarter from three months earlier, the first quarterly rise since 2022 when the impact of property-linked loan defaults on the Chinese economy was at its height.
Bank executives voiced concerns that the boost from cheaper deposits would fade, as weak loan demand continues to weigh on lenders.
"As the volume of maturing existing fixed-term deposits declines, the impact of deposit repricing on net interest margins will gradually weaken," Liu Jun, president of ICBC, said at a post-earnings press conference.
Liu Chenggang, vice president of Bank of China, said interest rates on newly issued yuan loans had shown signs of stabilising.
"But against the broader backdrop of slower, higher-quality credit growth, overall asset yields still face downward pressure," he said.
Weak loan demand remains a persistent drag. New yuan loans in China posted a record contraction in July, leaving banks with little room to expand their balance sheets or lift asset yields.
     
UNEVEN RECOVERY AS SMALLER BANKS MORE EXPOSED
The improvement in the banking sector is uneven, as smaller banks remain exposed while the biggest lenders have been sheltered by their risk aversion.
As the Chinese economy, with growth of around 4% stays sluggish, analysts also did not expect a sustained recovery.
"We do not expect margins to improve much in the near term, given the relatively low-rate environment and weak domestic consumer demand," said Elaine Xu, a director at Fitch Ratings.
Nicholas Zhu, a banking analyst at Moody’s, said he expected weak consumption to "continue to constrain fee growth prospects related to the card business".
He said asset risks would rise "as more creditworthy consumers refrain from increasing leverage but less creditworthy ones remain as active borrowers".
At ICBC and BoCom, NIM held steady across the second quarter, while the other three lenders' NIM edged up. 
At AgBank, BoC and BoCom, non-performing loan ratios held steady from the end of March to the end of June, while at ICBC it ticked down to 1.29% from 1.31%. 
CCB's NPL ratio also fell slightly to 1.29% from 1.31%.
($1 = 6.7201 Chinese yuan renminbi)

(Reporting by Ziyi Tang in Beijing and Selena Li in Hong Kong; writing by Engen Tham; Editing by Tomasz Janowski, Conor Humphries and Barbara Lewis)
((Ziyi.Tang@thomsonreuters.com;))