According to the Zhitong Finance APP, Dongfang Securities released a research report stating that as of the first half of 2025, the revenue, PPOP, and net profit attributable to shareholders of A-share listed banks grew at rates of 1.0%/1.1%/0.8% (cumulative year-on-year growth rates, same below), with quarter-on-quarter increases of +2.8pct/+3.3pct/+2.0pct. By sector, driven by non-interest income, state-owned banks showed the most significant performance improvement; in the context of weak asset expansion, the core revenue performance of joint-stock banks was slightly inferior. As of the first half of 2025, the year-on-year growth rates of total assets, interest-earning assets, and total loans of listed banks were +2.1pct/+2.1pct/+0.04pct quarter-on-quarter. The contribution of corporate and retail loans in the first half of 2025 was approximately 9:1, determining that the loan growth rates of state-owned and city commercial banks marginally outperformed those of joint-stock and rural commercial banks; in terms of financial investment structure, there was a further relative increase in OCI and a reduction in AC.
<h2>The main viewpoints of Dongfang Securities are as follows:</h2>
Performance growth has fully rebounded, with the most significant improvement in state-owned banks
As of the first half of 2025, the revenue, PPOP, and net profit attributable to shareholders of A-share listed banks grew at rates of 1.0%/1.1%/0.8%, with quarter-on-quarter increases of +2.8pct/+3.3pct/+2.0pct. Breaking it down, the growth rate of net interest income increased by +0.4pct quarter-on-quarter, the growth rate of net fee income increased by +3.8pct quarter-on-quarter, and the growth rate of other non-interest income increased by +13.9pct quarter-on-quarter. By sector, driven by non-interest income, state-owned banks showed the most significant performance improvement; in the context of weak asset expansion, the core revenue performance of joint-stock banks was slightly inferior; city commercial banks maintained good growth, with an absolute level advantage in performance growth still evident, particularly in Jiangsu, Zhejiang, and Shandong regions; rural commercial banks showed basically stable performance.
Non-loan assets drive banks to accelerate balance sheet expansion, with differentiation among sectors
As of the first half of 2025, the year-on-year growth rates of total assets, interest-earning assets, and total loans of listed banks were +2.1pct/+2.1pct/+0.04pct quarter-on-quarter. The contribution of corporate and retail loans in the first half of 2025 was approximately 9:1, determining that the loan growth rates of state-owned and city commercial banks marginally outperformed those of joint-stock and rural commercial banks; in terms of financial investment structure, there was a further relative increase in OCI and a reduction in AC.
By sector: 1) State-owned banks showed the most aggressive marginal asset expansion, with interbank asset growth increasing by +41.3pct quarter-on-quarter; 2) Joint-stock banks experienced relatively weak loan growth, with negative loan growth in the second quarter of 2025; 3) City commercial banks' asset expansion marginally ranked second after state-owned banks; 4) Rural commercial banks were the only sub-sector where asset expansion slowed. On the liability side, the following observations were made: 1) In the second quarter of 2025, the flow of bank deposits reversed, with state-owned banks' deposit growth increasing quarter-on-quarter, while city and rural commercial banks' deposits decreased quarter-on-quarter; 2) The characteristic of deposit liquidity has not yet been established, but city commercial banks seem to be leading in moving away from fixed-term deposits.
Significant improvement in liability costs supports the slowdown in net interest margin contraction
It is estimated that the net interest margin of listed banks in the first half of 2025 was 1.33%, narrowing by 11 basis points compared to 2024, with improvements in liability costs making a core contribution. The narrowing in the first half of 2025 compared to the first quarter of 2025 was greater than the same period last year, indicating that pressure on asset-side yields remains relatively high. In the first half of 2025, the estimated cost rate of interest-bearing liabilities for listed banks improved by 30 basis points, with an improvement of 24 basis points compared to the same period in 2024. As high-interest fixed-term deposits enter a concentrated repricing cycle, the improvement in liability costs is increasingly evident in supporting the net interest margin
From a sector perspective, the narrowing of net interest margin for city commercial banks in 25H1 was the smallest, while rural commercial banks performed impressively in 25Q2.
Pressure on individual loan asset quality remains, proactive bad debt disposal keeps bad debt indicators stable
As of 25H1, the non-performing loan (NPL) ratio of listed banks decreased by 0.4 basis points (BP) compared to 25Q1, with the attention rate down by 4 BP from the beginning of the year (same below), overdue rate up by 3 BP, and estimated NPL net generation rate up by 16 BP. The NPL write-off in 25H1 increased by 7.6% year-on-year. By sector, the asset quality of joint-stock banks seems to have reached a certain turning point, with the NPL balance of joint-stock banks decreasing by 3.2 billion yuan in 25Q2 compared to 25Q1.
By field, the pressure on NPL generation remains concentrated in individual loans. Among them, mortgage loans/consumer loans/business loans/credit cards increased by 10 BP/10 BP/18 BP/23 BP respectively compared to the beginning of the year. The estimated credit cost in 25H1 has for the first time broken below the NPL net generation rate, indicating that the momentum for provisions to support profits is weakening overall in the sector, but the relatively high provision coverage ratio of city and rural commercial banks still offers considerable room.
Capital adequacy ratio significantly rebounds, with 17 banks planning to implement interim dividends
The conditions for internal and external capital replenishment have improved, driving the capital adequacy ratio to show seasonal performance, particularly prominent among state-owned banks. More rural commercial banks plan to implement interim dividends in 25H1, with Minsheng, CITIC, Shanghai, and QRCB planning to increase their dividend ratios in the 25H1 interim dividends.
Investment Recommendations
As market risk appetite increases, the relative returns of bank stocks are under pressure, but considering the lack of a sustained upward basis for risk-free interest rates under the pressure of the macro economy, and the improving trend of bank performance in 25H1, it is expected that the adjustment space for bank stocks will be limited.
Currently, focus on two investment main lines: 1. Layout high-dividend varieties based on the reduction of insurance scheduled interest rates, recommended to pay attention to: China Construction Bank (601939.SH), Industrial and Commercial Bank of China (601398.SH), China Merchants Bank (600036.SH), Agricultural Bank of China (601288.SH); 2. Small and medium-sized banks with determined fundamentals, recommended to pay attention to: Industrial Bank (601166.SH), CITIC Bank (601998.SH), Nanjing Bank (601009.SH), Bank of Jiangsu (600919.SH), Hangzhou Bank (600926.SH).
Risk Warning
Monetary policy tightening beyond expectations; fiscal policy below expectations; risks related to the impact of assumption changes on estimation results

600919

002958

600926

Dongfang Securities released a research report indicating that as of 25H1, the performance of A-share listed banks has fully rebounded, with revenue, PPOP, and net profit attributable to shareholders growing at rates of 1.0%, 1.1%, and 0.8%, respectively. State-owned banks have shown significant improvement driven by non-interest income, while joint-stock banks' core revenue is slightly weaker. It is expected that the adjustment space for bank stocks is limited, with loan growth mainly led by state-owned and city commercial banks. Overall, the banking industry's performance has improved quarter-on-quarter, with non-credit assets accelerating balance sheet expansion

Dongfang Securities: 25H1 Banking Performance Fully Rebounds, Non-Loan Assets Drive Accelerated Balance Sheet Expansion