China’s banking sector’s earnings growth likely recovered slightly in Q2 from Q1, partly due to a lower base, and NIM contraction should have slowed down quarter on quarter, leading to more resilient NII growth, JPMorgan said in a note.
The five largest state-owned banks will adopt IFRS 17 for their insurance business this year, leading to volatility in the year-on-year trend of non-fee income and operating expenses, with Q2 earnings expected to grow by 6% from a year earlier, accelerating from the 2% in Q1, according to the note.
Minsheng Bank and Bank of China have higher earnings visibility, while Agricultural Bank of China and Industrial and Commercial Bank of China are likely to continue seeing weak earnings growth, it said.
JPM also adjusted its ratings and target prices for domestic banks. Citic Bank was downgraded to Neutral from Overweight, with a target price of HK$4.2, as its share price has gained about 20% since the start of the year, leaving limited room for further rise.
