Profits at China’s Five Largest Banks Post Fastest Quarterly Growth Since 2021 or 2022
Key Facts
China’s five largest state-owned banks recorded their fastest quarterly profit growth since 2021 or 2022, according to a Reuters report. This came despite continued weak credit demand and a slowing economy, both of which are weighing on lenders. Net interest margins were stable at Industrial and Commercial Bank of China, Agricultural Bank of China and Bank of China, while they edged up at Bank of Communications. At China Construction Bank, the net interest margin edged down to 1.36% in the third quarter of 2026. The divergence highlights that improved profits were not accompanied by a uniform rise in margins across the five banks.
Analyses cited by Reuters attributed part of the profit improvement to repricing higher-cost deposits, a process that began at the start of the year. Its supportive effect, however, began to fade in the second half, increasing the importance of other factors in lowering funding costs. Analysts said monetary easing and mortgage interest subsidies were helping reduce those costs and support margins. In September, policymakers stepped up targeted monetary support, leading to a modest improvement in credit demand. But analysts said these measures were unlikely to drive a major recovery in lending or a notable increase in mortgage growth.
On asset quality, nonperforming loan ratios remained stable at Industrial and Commercial Bank of China, China Construction Bank and Bank of China. The ratio edged down to 1.23% at Agricultural Bank of China and to 1.29% at Bank of Communications at the end of September 2026. China Construction Bank’s management said the Chinese economy had maintained overall stability and was moving toward innovation and upgrading. It acknowledged, however, ongoing challenges including strong supply and weak demand. These indicators paint a picture of stable asset quality alongside economic activity weighing on credit growth.
Fitch said the earlier-than-expected recovery in net interest margins, along with broadly stable credit costs, put major banks on a path to faster profitability recovery than smaller banks. By contrast, Nicholas Zhu, an analyst at Moody’s, warned that credit risks were gradually emerging in loans to technology and innovation sectors. He noted that companies in these sectors had not experienced a full economic cycle. Bond gains also remained an important source of support for bank profits, according to Reuters. Xing Zhaopeng, a strategist at ANZ, said this support might not last as bond yields fell to very low levels.
On activity indicators, data from the National Bureau of Statistics showed the manufacturing purchasing managers’ index fell to 49.3 in October, down 0.8 percentage points from the previous month. The non-manufacturing business activity index fell to 49.7, and the composite production index also declined to 49.7. Huo Lihui, the bureau’s chief statistician, said the decline in the manufacturing index was partly affected by some demand being brought forward ahead of the National Day holiday and by a complex and changing international environment. The data also showed a divergence by company size: the index for large companies was 50.2, compared with 48.4 for medium-sized companies and 47.5 for small companies. The reading for large companies remained above the 50 threshold, while those for medium-sized and small companies were below it, indicating different activity conditions by company size.
In trading indicators, EL7 data showed Agricultural Bank of China shares trading under the ticker ACGBY closed at $22.24 on October 30, 2026. The data showed shares of Industrial and Commercial Bank of China, trading under the ticker IDCBF, closed at $1 on the same day. At Bank of Communications, net trading gains rose 22.7% year over year in the first nine months of 2026. The bank attributed the increase largely to fair value gains following the July initial public offering of CXMT Technology. These factors place trading and bond gains among the sources of profit support, alongside improved margins and stable readings for some asset-quality indicators.