G Sachs: Tighter Tax Supervision Has Limited Impact on Effective Tax Rate and Liquidity of Chinese Banks; Remains Positive on BANK OF CHINA , CCB and BANK OF NINGBO

G Sachs said in a research report that China’s National Audit Office reportedly indicated that BANK OF CHINA (03988.HK) -0.020 (-0.401%) Short selling $469.72M; Ratio 16.165% underpaid taxes amounting to RMB2.367 billion, equivalent to about 1% of its net profit. The news led to a decline of more than 5% in the H shares of BANK OF CHINA in the previous trading session. Investors are generally concerned about whether the incident will raise the effective tax rate of Chinese-funded banks and tighten interbank liquidity. However, the broker believes that as the decline in effective tax rates of Chinese banks in recent years has mainly been driven by tax-exempt government bonds, the effective tax rates of major banks such as BANK OF CHINA are unlikely to rise significantly going forward.

G Sachs estimates that the average effective tax rate of the Big Four banks was 13% over the past three years and forecasts an average of 12% for the next three years. At the same time, strengthened tax supervision on banks’ holdings of public mutual funds is also not expected to materially tighten interbank market liquidity. However, the broker’s recent communication with banks indicates that the outlook for NIM guidance is less optimistic than before, mainly because the expected decline in deposit costs will gradually narrow.

Regarding interbank liquidity, G Sachs believes it is unlikely in the short term that tax exemption rules for specific mutual funds, especially money market funds, will change, as such exemptions are an important measure supporting the development of the mutual fund industry. In addition, signals from the recent Lujiazui Forum, including a downward shift in the interest rate corridor center and liquidity support for non-bank financial institutions, should help maintain ample interbank liquidity. Therefore, the broker does not expect enhanced tax supervision on mutual funds to lead to a significant tightening in the interbank market.

The broker maintains its stock selection framework. Amid slowing loan growth in the sector, it continues to prefer large banks that can sustain NIM and asset quality, strengthen balance sheets and deliver stable return on equity, including BANK OF CHINA (03988.HK) -0.020 (-0.401%) Short selling $469.72M; Ratio 16.165% , CCB (00939.HK) -0.140 (-1.687%) Short selling $519.98M; Ratio 21.016% , and BANK OF NINGBO (002142.SZ) +0.310 (+1.007%) . G Sachs rates the H shares of BANK OF CHINA and CCB, as well as BANK OF NINGBO, as Buy, with TPs of HKD5.95, HKD9.96 and RMB41.29, respectively. (ad/da)(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2026-06-25 16:25.) (A Shares quote is delayed for at least 15 mins.)