Multiple brokerage firms predict that the banking industry is expected to experience steady recovery

How Does the Stabilization of Interest Rate Spreads Drive Improvements in Banking Performance?

【Global.com Financial Report】More than half of A-share listed banks have disclosed their 2025 annual reports. According to Huatai Securities’ latest research report, the performance growth of listed banks in 2025 is expected to improve. Revenue and net profit attributable to the parent company are expected to increase by 1.4% and 1.6% year-on-year, respectively, mainly due to the marginal stabilization of interest rate spreads and a boost from non-interest income.

China Merchants Securities believes that in 2025, banking operations showed four core characteristics: “performance differentiation, steady scale growth, improving asset quality, and steady and sound dividends.” On the performance side, industry profitability remains resilient but the differentiation is significant. The net profit growth rate of state-owned banks improved compared with the first three quarters; differentiation among joint-stock banks intensified; and leading city commercial banks took the lead. Asset scale grew steadily, interest rate spreads remained stable, and the growth rate of net interest income rebounded. Overall, the asset scale growth rate of listed banks is basically stable compared with the first three quarters, while loan growth is slightly lower than in the first three quarters.

Looking ahead to 2026, China Merchants Securities believes that as the macroeconomy warms up, policy support continues to increase, bank business structures are optimized, and risks are gradually eased, volume growth alongside stable pricing is expected to enable steady recovery in industry performance. Coupled with support from high dividend attributes, sector valuations are expected to achieve a mild rebound, and the differentiated competitive advantages of high-quality banks will become even more prominent.

CITIC Securities Construction Investment states that as the decline in interest rate spreads narrows, and with no major drag from other non-interest factors, revenue is expected to continue improving and profits can maintain stable growth. Currently, with the actual operation and the market’s expectations of the bottom for the banking industry further consolidated, the sector has strong defensive and risk-hedging attributes, mainly to hedge market risks. Within the sector, rotation may occur frequently based on short-term fundamentals and dividend yield valuation comparisons. It is recommended to balance exposure by focusing on high-quality targets with excellent fundamentals and solid dividend yields.

Tianfeng Securities believes that due to the “mismatched” operation of credit and deposits, banks’ liquidity positions have remained relatively ample this year. This is reflected in overall stability in the first quarter, further easing in the second quarter, and a smooth downward move in the central point of market interest rates.

Huatai Securities suggests focusing on the following: first, in Q4 2025, the marginal stabilization of net interest margins for listed banks, which drives an improvement in net interest income growth; second, the restoration of growth in non-interest income, with differentiation in non-interest income growth; third, a slight acceleration at the margin in scale growth among listed banks, with the trend of deposits shifting toward term deposits continuing; fourth, improvement in non-performing loans on the books, but some volatility in risks in retail and other areas. (Wen Hui)