According to the Zheshang Securities research report, the performance of listed banks in Q1-3 of 2025 slightly exceeded expectations, with revenue growth remaining basically flat and profit growth showing a slight increase. In terms of driving factors, the marginal improvement in Q3's interest margin alleviated the revenue drag, while impairment contributed more to profits; the slowdown in scale and non-interest income growth dragged down revenue performance, and increased costs and tax expenditures negatively impacted profit performance. By bank type, large banks showed a comprehensive positive performance, while the performance of small and medium-sized banks was mixed. The revenue and profit growth of banks in the third quarter showed strong resilience, with large banks achieving comprehensive positive performance and the interest margin of small and medium-sized banks rebounding more than expected. Previously, bank stocks were suppressed by major funds, but with limited chips, the market style is rebalancing, and Q4 is expected to see a rebound.
<h2>The main viewpoints of Zheshang Securities are as follows:</h2>
Performance Overview: The revenue growth rate of listed banks is basically stable at 0.9%, and the profit growth rate has increased to 1.6%.
The performance of listed banks in Q1-3 of 2025 slightly exceeded expectations, with revenue growth remaining basically flat and profit growth showing a slight increase. In Q1-3 of 2025, the weighted revenue and net profit attributable to the parent company of listed banks increased by 0.9% and 1.6% year-on-year, with growth rates slowing by 0.1 percentage points and increasing by 0.8 percentage points compared to H1 of 2025. In terms of driving factors, the marginal improvement in Q3's interest margin alleviated the revenue drag, while impairment contributed more to profits; the slowdown in scale and non-interest income growth dragged down revenue performance, and increased costs and tax expenditures negatively impacted profit performance.
By bank type, large banks showed a comprehensive positive performance, while the performance of small and medium-sized banks was mixed. Among them, Agricultural Bank of China, Bank of Communications, Bank of China, and Industrial and Commercial Bank of China performed better than expected, while China Construction Bank saw a relatively large decline in quarterly interest margin, and Postal Savings Bank still faces pressure on asset quality. The interest margin of joint-stock banks and city commercial banks rebounded significantly, averaging 5 basis points, better than expected. The performance of Chongqing, QLB, and Xiamen significantly exceeded expectations, while China Merchants Bank, Qingdao, Ningbo, Jiangsu, Changsha, and Changshu performed better than expected.
Driving Factors: A new relationship of quantity and price balance, with weakening volume but stabilizing interest margin, enhancing the ability to compensate price with volume.
(1) Decline in scale growth. In Q1-3 of 2025, the asset scale of listed banks grew by 9.3% year-on-year, with the growth rate narrowing by 0.3 percentage points compared to H1 of 2025. Loan growth is declining, while financial investment growth is increasing. By asset type, the loan growth rate of listed banks in Q1-3 of 2025 narrowed by 0.3 percentage points to 7.7%, indicating insufficient effective credit demand; financial investment growth increased by 0.9 percentage points to 15.8%, aligning with the pace of government bond issuance. The expansion momentum of city and rural commercial banks is recovering. By bank type, the asset growth rate of state-owned banks narrowed by 0.4 percentage points, while the asset growth rate of city and rural commercial banks increased by 0.6 percentage points.
(2) Stabilization of interest margin. Overall, the interest margin of listed banks in Q3 of 2025 (beginning and end of the period, same below) increased by 0.3 basis points to 1.37%, which is in line with expectations. On both asset and liability sides, the asset yield of listed banks in Q3 of 2025 decreased by 7 basis points to 2.81%, and the cost of liabilities decreased by 8 basis points to 1.56%. Referring to the detailed data disclosed by China Merchants Bank and Ping An for Q3 of 2025, the yields on various assets on the asset side decreased sequentially, with the loan yields of China Merchants Bank and Ping An decreasing by 13 basis points and 9 basis points respectively, and the bond investment interest yields decreasing by 7 basis points and 8 basis points respectively;
From the perspective of liabilities, the cost rate of deposits and the cost rate of interbank liabilities have decreased significantly. The cost rate of deposits for China Merchants Bank and Ping An decreased by 10bp and 12bp respectively, while the cost rate of interbank liabilities decreased by 8bp and 20bp respectively.
In terms of various types of banks, the rebound in net interest margins for joint-stock banks and city commercial banks exceeded expectations, mainly due to a better-than-expected decline in the asset side, with improvements on the liability side greater than the decline on the asset side. In Q3 2025, the quarter-on-quarter net interest margin for state-owned banks, joint-stock banks, city commercial banks, and rural commercial banks changed by -2bp, +5bp, +4bp, and +1bp to 1.28%, 1.59%, 1.45%, and 1.51% respectively. Looking ahead for the year, it is expected that the net interest margin will continue to stabilize, mainly considering the limited space for interest rate cuts, while the improvement in deposits will continue to be beneficial.
(3) Non-interest income growth has narrowed. In Q1-3 2025, the non-interest income of listed banks grew by 5.0% year-on-year, with a quarter-on-quarter narrowing of 2.0 percentage points. Fee income: quarter-on-quarter improvement in growth. In Q1-3 2025, the fee and commission income of listed banks grew by 4.6% year-on-year, with a quarter-on-quarter increase of 1.5 percentage points, and the growth rate of non-interest income for various types of banks has improved to some extent. This is speculated to be related to the recovery of the capital market and the trend of deposit migration, with income from wealth management, agency sales, custody, and other businesses further recovering.
Investment: quarter-on-quarter decline in growth. In Q1-3 2025, the bond trading income (fair value fluctuations + investment income) of listed banks decreased by 0.6% year-on-year, turning from a positive growth of 1.1% in H1 2025 to negative growth. By bank type, in the third quarter, state-owned banks consolidated their advantages in the financial market, with bond trading income growing by 24.7% year-on-year, and a quarter-on-quarter increase of 4.5 percentage points. The decline for small and medium-sized banks further widened. Joint-stock banks and city commercial banks saw their trading income decrease by 19.1% and 13.6% year-on-year, with quarter-on-quarter declines widening by 6.1 percentage points and 7.9 percentage points respectively; rural commercial banks, on the other hand, grew by 1.9% year-on-year, with a quarter-on-quarter narrowing of 5.2 percentage points.
In terms of scale, financial investments continue to expand. From the perspective of account classification, state-owned banks increased their allocation to AC accounts, with the scale of AC accounts growing by 5.5% and 3.4% quarter-on-quarter, higher than the overall growth rate of financial investments; city commercial banks focused on OCI accounts, with OCI account scale growing by 9.2% quarter-on-quarter, also higher than the overall growth rate of financial investments; rural commercial banks saw a contraction in AC accounts and TPL accounts in the third quarter, with declines of 1.9% and 5.9% quarter-on-quarter respectively. In terms of pricing, the bond market has undergone a deep correction.
As of September 30, 2025, the closing price of the China Bond New Comprehensive Price Index fell by 1.5% compared to the end of the previous quarter, and the yield on 10-year government bonds rose by 21bp compared to the end of the previous quarter. In terms of OCI reserves, there are still some OCIs waiting to be released. If all other comprehensive income under equity is released by the end of Q3 2025, it is expected to still support a 5.2% contribution to annual revenue. Looking ahead, the bond market is expected to fluctuate in the fourth quarter, and the business in the gold market had a high base last year, so it is expected that the contribution of non-interest income to revenue will continue to be under pressure.
(4) Retail pressure remains. In terms of stock indicators, the non-performing indicators are stable, while the attention indicators fluctuate. By the end of Q3 2025, the weighted average non-performing loan ratio of 42 sample banks remained flat at 1.23% quarter-on-quarter, while the weighted average attention rate of 32 sample banks rose by 2bp to 1.69% quarter-on-quarter. Structurally, it is noted that the attention rate of state-owned banks (only Bank of Communications and Postal Savings Bank) and rural commercial banks fluctuated significantly quarter-on-quarter, indicating that they are still affected by retail asset drag
From the perspective of generation indicators, the improvement in non-performing generation shows that some banks are experiencing peak risk exposure pressure. The simple average non-performing generation rate of 39 sample banks for 25Q3 TTM improved by 3 basis points quarter-on-quarter. Structurally, the non-performing generation levels of joint-stock banks and rural commercial banks improved quarter-on-quarter, mainly due to marginal improvements in some banks with significant risk pressure, such as Ping An and Qingnong.
In terms of different loans, retail risk continues. The retail non-performing loans continued to rise in 25Q3, while corporate non-performing loans continued to improve, as seen with China Merchants Bank and Bank of Communications. At the end of 25Q3, the retail non-performing loan rates of China Merchants Bank and Bank of Communications increased by 1 basis point and 8 basis points quarter-on-quarter, respectively, while the corporate non-performing loan rates decreased by 5 basis points and 6 basis points quarter-on-quarter, respectively. Furthermore, small and micro loan non-performing pressure is significant. At the end of 25Q3, the non-performing loan rates for small and micro loans at China Merchants Bank and Bank of Communications increased by 15 basis points and 12 basis points quarter-on-quarter, respectively. Looking ahead, the asset quality of bank stocks is expected to remain stable. However, from a structural perspective, the industry-wide exposure of retail risk and the continued improvement of corporate non-performing loans may persist.
(5) Increase in interim dividends. More banks disclosed interim dividend plans in 2025, with first-time interim dividends from joint-stock banks such as China Merchants Bank and Industrial Bank; city commercial banks such as Ningbo and Changsha; and five listed rural commercial banks in the Suzhou and Wuxi regions. Some banks have increased their interim dividend rates in 2025 compared to 2024. Banks with an increase in interim dividend rates in 2025 compared to the total dividend rate for 2024 include Changshu Bank, Bank of Shanghai, Xiamen Bank, Hangzhou Bank, and CITIC Bank, with Changshu Bank showing the largest increase (up 5.5%).
Recommended Portfolio
Shanghai Pudong Development Bank (600000.SH), Nanjing Bank (601009.SH), Bank of Shanghai (601229.SH), Bank of Jiangsu (600919.SH), Agricultural Bank of China (601288.SH), Bank of Communications (601288.SH), and pay attention to QLB (601665.SH) and H-share large banks.
Risk Warning
Macroeconomic slowdown, significant outbreak of non-performing loans, operational performance below expectations, discrepancies between estimates and actual results

601229

600919

601665

600926

601288

ACGBY

01288

Zhejiang Merchants Securities released a research report indicating that the performance of listed banks in the first to third quarters of 2025 slightly exceeded expectations, with revenue growth remaining flat and profit growth slightly improving. The performance of large banks turned positive across the board, while the performance of small and medium-sized banks varied. It is expected that in the fourth quarter of 2025, market styles will rebalance, and bank stocks are likely to rebound

Zhitong

Bank of Shanghai

Bank Of Jiangsu

HZBANK

Agricultural Bank of China

Zhejiang Merchants Securities: In Q3 2025, the revenue and profit growth of banks showed strong resilience, and Q4 is expected to rebound significantly