China’s biggest state-owned lenders reported higher first-half profits as stabilising net interest margins offered respite after years of earnings pressure from property debt risks and sluggish credit demand.
Net income at Industrial & Commercial Bank of China Ltd, the nation’s largest lender, rose 3.3% from a year earlier to 173.68 billion yuan (US$25.8 billion or RM104.2 billion), according to an exchange filing Friday. Its net interest margin, a key gauge of profitability, narrowed just one basis point to 1.29%, after posting steep drops earlier.
Other major lenders reported larger profit gains. Agricultural Bank of China Ltd’s net income rose 4.9%, Bank of Communications Co reported a 4% gain, Bank of China Ltd posted a 5.1% increase and China Construction Bank Co saw a rise of 4.6%.
The results offer fresh evidence of improvements in China’s banking industry after a prolonged margin squeeze. The industry-wide net interest margin rose to 1.41% in the second quarter from 1.40% in the previous three months, according to regulator data, marking the first quarterly expansion since 2022.
Local currency “NIM was up by two basis points quarter-on-quarter, while foreign-currency NIM rose 13 basis points year-over-year, providing strong support for the group’s overall margin stabilization,” said Zhang Hui, president of Bank of China, at an earnings briefing.
The improvements were driven largely by falling funding costs, as higher-yielding deposits locked in several years ago matured and banks repriced liabilities at lower rates. Even so, margins remain near record lows.
Asset quality remains a key concern. Borrowers ranging from heavily indebted property developers to households have yet to fully recover from the economic slowdown, keeping pressure on banks’ balance sheets. While most banks reported improvements in their headline non-performing loan ratios, the underlying data reveals pockets of stress.
ICBC’s non-performing loan ratio stood at 1.29%, down from 1.31% at the end of June 2025. In contrast, Bocom’s NPL ratio rose to 1.30% from 1.28% over the same period.
Lenders also face a difficult balancing act. Weak credit demand and lower lending rates are limiting loan growth and compressing returns, while policymakers continue to urge banks to support the real economy. The banking sector’s non-performing loan balance hit 3.7 trillion yuan at the end of June, while the NPL ratio stood at 1.52%.
Major lenders have continued to raise interim cash dividend payout ratios, with ICBC increasing its ratio to 31% from 30% and CCB to 32% from 31%.
“The move was intended to address investor demand and market expectations, supported by the bank’s resilient earnings and operating performance,” said Tian Fenglin, ICBC board secretary, adding that dividend policy would remain flexible and be adjusted in line with macroeconomic conditions, regulatory guidance and business needs.
Source: Theedgemalaysia