China Post Securities: Banks report steady revenue and profit growth with slight fluctuations in asset quality

The Zhitong Finance App learned that China Post Securities released a research report saying that the year-on-year growth rates of listed banks' operating income, profit before provision, and net profit to mother were 7.42%, 9.85%, and 2.96% respectively in the first half of 2026, which remained stable overall compared to the first quarter. Overall, industry revenue and profit growth was steady, with urban commercial banks leading the profit growth rate. Currently benefiting from support such as new policy financial instruments, the growth rate of fixed asset investment in key provinces and cities may improve markedly.

China Post Securities's main views are as follows:

Revenue growth remains stable, and profit performance continues to diverge

In the first half of 2026, the overall operating income of listed banks, profit before provision, and net profit to mother grew by 7.42%, 9.85%, and 2.96%, respectively, and remained stable compared to the first quarter. The overall revenue and profit growth of the industry is steady. The profit growth rate of urban commercial banks is leading, and the net profit growth rate of stock banks returning to parent is slightly under pressure.

The growth rate of interest-bearing assets is slowing down, and the share of bond investment continues to rise

At the end of the first half of 2026, the interest-bearing assets of listed banks increased 7.67% year on year, down 1.48 percentage points from the end of the first quarter; loans and advances increased 6.61% year on year, down 0.48 percentage points from the end of the first quarter. Bond investment increased 14.50% year over year, and the share of interest-bearing assets rose to 29.76%, up 0.64 percentage points from the end of the first quarter. Asset allocation was further skewed towards bond investment.

The decrease in the cost of debt was slightly greater than the return on assets, and the net interest spread stabilized overall

The net interest spread of listed banks in the first half of 2026 was 1.35%, up 0.96BP from the first quarter; return on interest-bearing assets and interest-paying debt cost ratio were 2.61% and 1.36% respectively, down 1.22BP and 2.38BP from the first quarter. The reduction in debt costs has supported the stabilization of interest spreads, and the marginal improvement in net interest spreads of state-owned banks and urban commercial banks is relatively obvious.

The growth rate of non-interest income declined, and processing fees weighed on second-quarter performance

In the first half of 2026, non-interest income of listed banks increased 5.21% year on year, down 3.36 percentage points from the first quarter; net handling fee revenue increased 1.08% year on year, down 4.70 percentage points from the first quarter, of which the second quarter fell 4.75% year on year. Other non-interest income increased 8.86% year on year in the first half of the year; state-owned bank non-interest income increased 10.33% year on year, while urban commercial banks and agricultural commercial banks decreased 7.22% and 12.03% respectively.

The overall non-performing rate fluctuates slightly, and credit costs and provision performance are differentiated

At the end of the first half of 2026, the overall non-performing loan ratio of listed banks was 1.22%, a slight increase from the end of the first quarter and basically the same as at the end of the previous year; the provision coverage rate was 232.98%, down 1.22 percentage points from the end of 2025. The estimated credit cost for the second quarter was 0.24%, down 1.43BP month-on-month and up 1.30BP year-on-year. The provision coverage rate for urban commercial banks and agricultural commercial banks dropped relatively much compared to the end of the year, and depreciation accruals and provision consumption still need attention.

Investment advice

Currently, benefiting from support from new policy financial instruments, etc., the growth rate of fixed asset investment in key provinces and cities may improve markedly, while the growth rate of some state-owned banks and agricultural commercial banks in regional cities remains high. In terms of investment direction: First, it is recommended to focus on urban commercial banks that have clearly benefited from improvements in fixed asset investment: Bank of Jiangsu, Bank of Qilu, Bank of Qingdao, etc. Second, focus on targets where asset quality continues to improve, and performance has reached an inflection point: China Construction Bank, Ping An Bank, etc.

Risk Alerts

Model calculation errors, deviations from assumptions and reality, policy implementation fell short of expectations, external events worsened beyond expectations, and widespread exposure of non-performing assets