Cathay Pacific Haitong 2026 Bank Interim Report Phased Summary: Outstanding Performance and Resilience in High-Quality Urban Businesses, Focus on Grasping the Three Directions

The Zhitong Finance App learned that Cathay Pacific Haitong released a research report stating that as of 26/08/23, a total of 8 banks had disclosed semi-annual reports & rapid performance reports, and the urban business sector in high-quality regions had outstanding performance resilience. In the phase of increasing market volatility, the banking sector allocation proposal adopts the strategy of “pioneering commercial banks and later big banks”, focusing on three major directions: 1) recommending banks with both excellent performance and dividend attributes; 2) focusing on banks with convertible debt-to-equity swaps; 3) If the style is expected to be balanced in the second half of the year, there are still allocation opportunities in the sector, and major state-owned banks are recommended.

Cathay Pacific Haitong's main views are as follows:

The performance of listed banks grew steadily in the second quarter, and the resilience of urban commercial banks in high-quality regions was outstanding. It has been disclosed that the revenue and net profit of the eight banks all recorded positive year-on-year increases. The overall strength of urban commercial banks is stronger, and the growth rate is generally close to double digits; the lower single digit improvement among stock banks. Judging from the driving factors, net interest income is the main driver of revenue resilience, and there is a differentiation between intermediate income and other non-interest income. At the individual stock level, Bank of Ningbo had the most outstanding performance. Revenue and net profit were +11.5% and +12.1% year-on-year, which was 1.3 and 1.8 pct faster than Q1, respectively. The Bank of Nanjing, the Bank of Chongqing, and the Bank of Jiangsu also maintained steady growth of about 9% to 11% in revenue and 8% to 10% in profit.

Urban commercial banks continued to expand at a relatively rapid pace, mainly relying on public support. Urban commercial banks as a whole maintained a strong expansion trend. The asset growth rate ranged from 11% to 18%, and the loan growth rate was 13% to 17%; stock banks grew in low single digits. Among them, Bank of Jiangsu led the asset growth rate, reaching 17.2% year on year. Bank of Ningbo's loan growth rate was outstanding, reaching 16.5% year on year. Judging from marginal changes, after most banks rapidly expanded their accounts in the first quarter, the growth rate of assets and loans declined somewhat in the second quarter. Bank of Ningbo 26H1 assets and loans grew by 13.8% and 16.5%, respectively, a further increase of 0.1 pct and 0.9 pct compared with Q1. From a structural point of view, most bank loan growth is mainly driven by public business, and the retail side's contribution is still weak.

The trend of interest spreads has stabilized, and the resilience of net interest income is outstanding. Driven by improvements in debt costs, interest spreads for most banks have stabilized. Among them, the 26h1 interest spreads of Jiangyin Bank and Ping An Bank improved by 3 bps and 1 bps compared to 26q1, respectively; Bank of Chongqing's interest spreads rebounded 7 bps over 25 years. Interest spreads of Bank of Ningbo, Bank of Jiangsu, and Bank of Nanjing declined by 3-9 bps compared to 25 years, and the decline is expected to narrow quarterly. The net income of 26H1 commercial banks in the four cities all grew by more than 10% year on year. Among them, the Bank of Nanjing continued to grow strongly by +40.2% year over year; Bank of Chongqing and Bank of Jiangsu were +26.0% and +12.0% year-on-year, improving growth rates by 13.2 pct and 4.7 pct, respectively, compared to Q1.

The performance of non-interest income was quite mixed. In terms of middle income, Bank of Ningbo had the most outstanding performance, with 26H1 +53.9% year-on-year, driven by the good performance of Yongying Fund and financial managers. The Bank of Jiangsu and the Bank of Nanjing had a year-on-year income ratio of +0.3% and -18.5%. Earnings showed structural differentiation characteristics. Wealth management-related business performance was outstanding, but factors such as increased spending and falling underwriting rates had a negative impact. In other non-interest terms, Ping An Bank and Bank of Jiangsu maintained positive growth, +8.0% and +1.4% year-on-year in 26H1; Bank of Ningbo's decline narrowed significantly by 16.1 pct compared to the first quarter.

The overall quality of assets is stable. The non-performing rate of most banks remained flat or declined slightly from month to month. Among them, the Bank of Chongqing, Bank of Chongqing, and Bank of Jiangyin decreased by 2 bps, 1 bp, and 1 bp, respectively, from the first quarter. In terms of provision, the trend is relatively stable, and risk compensation capacity is sufficient. Bank of Jiangyin Bank and Bank of Ningbo's provision coverage increased by 19 pcts and 4 pcts to 349% and 373% compared to the first quarter.

Risk warning: Demand for credit is weaker than expected; structural risk exposure exceeds expectations.