In "The Big Banks," Citigroup expects a significant narrowing of the decline in net interest margin for banks this year, supporting profit recovery and generally raising target prices

Citi Research report indicates that the downward trend in revenue for the domestic banking sector since 2023 has come to an end. Based on positive signs in net interest margin and wealth management fee income in the fourth quarter of last year, the bank expects a significant narrowing of the decline in net interest margin this year, stabilizing on a quarterly basis from the second half of the year. Coupled with the recovery in fee income, this should support the pre-provision profit of the domestic banking sector to return to normal low to mid-single-digit growth.

The bank believes that moderate revenue growth and stable dividends will become the new normal for the industry; it raised the target price for Bank of China (03988.HK) from HKD 3.9 to HKD 6.7, China Construction Bank (00939.HK) from HKD 10.4 to HKD 10.9, Bank of Communications (03328.HK) H shares from HKD 9.2 to HKD 9.3, and Industrial and Commercial Bank of China (01398.HK) from HKD 5.2 to HKD 7.5, all maintaining an "Outperform" rating.

At the same time, Citi lowered the target price for Postal Savings Bank of China (01658.HK) from HKD 6.7 to HKD 6.3, maintaining an "Outperform" rating, Bank of Communications (601328.SH) A shares from RMB 9.4 to RMB 9.3, and Ping An Bank (000001.SZ) target price from RMB 13 to RMB 12.7. All of the above stocks received an "Outperform" rating. The preferred stock is China Merchants Bank (03968.HK) (maintaining a target price of RMB 70 and an "Outperform" rating), Bank of China, and China Construction Bank