BANK OF CHINA(SH:601988) Jing Ji Guan Cha Wang·2025-10-29 10:51Core Viewpoint - The continuous narrowing of net interest margin (NIM) has been a core issue affecting the profitability and valuation performance of Chinese banks, particularly China Bank, reflecting the deepening of interest rate marketization and changes in the macroeconomic environment. However, recent data suggests that this downward pressure may be nearing an end, indicating a potential turning point for the banking sector [1][2]. Group 1: NIM Stabilization - In Q3 2025, China Bank reported a stable NIM of 1.26%, halting a decline that began in H1 2023 when it was 1.67%. This stabilization is echoed by other banks, such as Jiangyin Bank and Ningbo Bank, which also reported stable or slightly improved NIMs [2][3]. - Jiangyin Bank's NIM rose to 1.56%, and Ningbo Bank maintained a NIM of 1.76%, indicating a positive trend across various types of banks [2][3]. Group 2: Factors Behind NIM Stabilization - The stabilization of NIM is attributed to a dynamic balance between asset and liability factors. On the asset side, the downward pressure on new loan pricing has eased, with the reduction in LPR (Loan Prime Rate) slowing down significantly [4][5]. - The growth rate of corporate loans for China Bank was 11.71%, significantly higher than the 0.56% growth in personal loans, which helps stabilize overall asset yield [4]. - On the liability side, the effectiveness of managing deposit costs is becoming evident, as many high-interest term deposits are maturing and being renewed at lower rates [5]. Group 3: Rise of Non-Interest Income - Alongside NIM stabilization, there is a notable shift in the banking business structure, with non-interest income becoming a more significant revenue source. For China Bank, non-interest income reached 165.41 billion yuan in the first three quarters, a 16.20% year-on-year increase, accounting for 33.67% of total operating income [7]. - This structural change indicates a shift in the banking profit model from solely relying on interest spread to a dual-driven approach of "interest spread + non-interest income" [7]. Group 4: Future Challenges and Opportunities - Despite positive signs of stabilization, the banking sector still faces significant challenges, including the absolute level of NIM remaining historically low. China Bank's NIM of 1.26% is still under pressure compared to international peers and its historical performance [8]. - The intensity and sustainability of economic recovery will directly impact credit demand and asset quality, posing risks to NIM stability [8]. - The future differentiation among banks will intensify, with those excelling in cost management, non-interest income development, and risk pricing likely to navigate through cycles more effectively [9].