Morgan Stanley lowered target price for Chinese bank stocks by average 12%

 

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Chinese banks’ net interest margins will continue to narrow, but credit demand will recover moderately and net interest margins are expected to return to stability in the second half of 2025, said Morgan Stanley in a report.

Retail-focused mainland banks with more wealth management business will face more pressure in the near term, such as China Merchants Bank and Ping An Bank, mainly due to fee rate cuts and uneven consumer recovery, while state-owned banks remain defensive choices with high dividend yields, it said. 

Reduced window guidance and less competition will help stabilise return on equity and net interest margins and Postal Savings Bank of China will benefit from agricultural land upgrading and rural development, it said.

The broker lowered its target price for all Chinese banks it covered by an average of 12%, keeping their long-term return on equity unchanged, but adjusting its beta coefficient to reflect slower investment and credit growth.