Citi expects that the revenue of domestic banks in the fourth quarter of last year increased by 2.1% year-on-year, with Bank of China and Bank of Ningbo as the top picks

Citi released a report expecting that the revenue of domestic banks will increase by 2.1% year-on-year in the fourth quarter of 2025, mainly benefiting from robust fee income and stabilizing net interest margins, partially offsetting the impact of slowing loan growth. Against the backdrop of stable asset quality, the bank expects domestic banks to release provisions to support profit growth.

Among domestic banks, Citi expects Chongqing Rural Commercial Bank (03618.HK) to outperform expectations in the fourth quarter, while China Everbright Bank (06818.HK) and Changshu Bank (601128.SH) are expected to underperform, and Ping An Bank (000001.SZ) slightly missed expectations.

The report indicates that domestic banks experienced strong loan growth in January, primarily driven by corporate loans. Net interest margin pressure is expected to ease in 2026, with revenue growth in the banking sector in fiscal year 2026 expected to improve slightly compared to fiscal year 2025, mainly due to stabilizing net interest margins and strong fee income. As the yield on China's ten-year government bonds peaks, the spread between dividend yields and ten-year government bond yields will widen, attracting investors seeking returns from southern funds. The bank's top picks are Bank of China (03988.HK) and Bank of Ningbo (002142.SZ)