19 August 2025 China Banks Equities 1H25 results preview: three key variables China 2Q25 preview: We expect 2Q25 net profit growth for our covered mainland China banks to improve from 1Q25, driven by smaller-than-expected NIM compression, stable credit costs, and effective cost control. Of the key aspects we monitor, we expect three positive, one negative, and two mixed trends in the coming quarter: Investment thesis: Overall, we expect net profit growth for 2Q25 to be better than that of 1Q25, thanks to in ...

Core Insights - Truist Financial (TFC) is experiencing steady loan growth, with average loans and leases held for investment reaching $312.6 billion as of June 30, 2025, marking a 2% year-over-year increase [1][11] Loan Growth and Earnings - The improvement in average loan balance has led to higher average earning assets for TFC in the first half of 2025, despite a decline in yield on the average total loan portfolio to 5.99%, down 42 basis points from the prior year [2] - Truist's net interest income (NII) for the first half of 2025 was $7.09 billion, reflecting a 3% year-over-year growth, with net interest margin improving by 7 basis points to 3.02% [3][11] Management Outlook - Management is optimistic about NII growth, projecting an increase of approximately 3% in 2025, supported by low single-digit average loan growth and anticipated reductions in the Fed funds rate [4] - Truist plans to reprice around $27 billion of fixed-rate loans and investment securities in the second half of 2025, with new fixed-rate loans expected to have a run-on rate of about 7% compared to a current run-off rate of nearly 6.4% [4] Future Projections - The company expects modest loan growth, favorable loan repricing, and strategic balance sheet management to counteract Fed rate cuts, with NII projected to grow by 2.8%, 3.1%, and 4.5% in 2025, 2026, and 2027, respectively [5] - The projected net interest margin (NIM) for 2025, 2026, and 2027 is estimated to be 3.05%, 3.14%, and 3.25%, respectively [5] Peer Comparison - PNC Financial has seen a five-year CAGR of 5.6% in total loans from 2019 to 2024, with a positive outlook for loan demand due to expected interest rate cuts in 2025 [6] - U.S. Bancorp has also experienced strong loan growth, with a five-year CAGR of 5.1% and a focus on expanding customer relationships [8]

Financial Performance Highlights - IFS's quarterly net profit in 2Q25 reached S/ 579.6 million, a 29.9% increase QoQ [207] - IFS achieved a ROE of 20.7% in 2Q25 [34] - Banking sector ROE was 11.1% in 2Q25 [35] - Wealth Management saw a significant ROE increase to 43.9% in 2Q25, approximately 20x YoY [35] - Insurance sector ROE was 58.3% in 2Q25 [35] Business Trends and Growth - System loan book as of June 2025 showed a QoQ increase of 3.1% and a YoY increase of 1.7% [31] - Total commercial loans increased by 4.1% QoQ and 9.8% YoY [202] - Total retail loans increased by 1.1% QoQ and 1.2% YoY [202] - Total deposits increased by 2.7% QoQ and 7.4% YoY, reaching S/ 52,036.0 million [204] Key Ratios and Indicators - IFS's cost-to-income (C/I) ratio was 35.9% in 2Q25 [45] - Banking sector's C/I ratio was 42.3% in 2Q25 [49] - Banking sector's NIM was 5.1% [136] - The cost of risk for the banking sector is at 2.5% [139]

Financial Data and Key Metrics Changes - The company reported a record quarterly net income increase of 76% and new loan production up 72% compared to Q2 2024 [5] - Revenue grew by $31 million, with pretax income increasing by $14 million, resulting in a core pretax return on equity of 24% [5][6] - The net interest margin (NIM) for the quarter increased to 3.82%, up 47 basis points from the previous quarter [9][17] Business Line Data and Key Metrics Changes - The total loan portfolio grew by 30.8% year over year, reaching $5.9 billion in UPB [16] - Record loan production in Q2 was just over $725 million, a 13.3% increase from Q1 [14] - The weighted average coupon on new held-for-investment originations was strong at 10.5% [15] Market Data and Key Metrics Changes - The company experienced a significant increase in transactions, particularly in commercial and residential properties, with a portfolio increase of approximately $1.4 billion [6] - Nonperforming loans slightly decreased to 10.3%, reflecting effective asset management and resolution efforts [9][19] Company Strategy and Development Direction - The company aims to leverage its unique business structure as a C Corp to retain earnings and grow book value [11][12] - There is a focus on technology improvements to enhance operational efficiency over the next 12 to 18 months [35][36] - The company is exploring opportunities for alternative financing sources, including private capital, to support portfolio growth [43][44] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing healthy market conditions and a strong pipeline for new loans [22] - The target NIM is set at 3.5%, with expectations for sustainable growth in loan production [26][30] - The company believes it has not reached peak performance and sees room for improvement in efficiency [35][36] Other Important Information - The company completed four securitizations in Q2, issuing nearly $1 billion in securities, which provided significant liquidity [7][21] - Total liquidity at the end of Q2 was $139.2 million, with ample warehouse capacity to support growth [21] Q&A Session Summary Question: Can you discuss NIM expectations going into Q3 and loan growth for H2? - Management targets a consistent NIM of 3.5% and expects continued loan growth, although it may not be linear [26][30] Question: Are there opportunities for improvement or is this optimal performance? - Management believes there is room for improvement, particularly through technology enhancements to increase productivity [35][36] Question: How broad is the company's origination platform geographically? - The company operates in 48 states, with a strong presence in major MSAs, including a high-performing office in Miami [38][39] Question: Will the company consider incorporating loan sales into its financing strategy? - Management is open to exploring private credit sources and alternative financing structures to support growth [43][44] Question: What is driving the increase in prepayment rates? - Prepayment activity is driven by property sales and refinancing, with the company indifferent to the reasons due to prepayment penalty fees [45][46]

Financial Data and Key Metrics Changes - Banco de Chile reported a net income of CLP 654 billion for Q2 2025, representing a year-to-date growth of 2% and resulting in a return on equity (ROE) of 21.9% [4][26] - The bank's operating income totaled CLP 763 billion in 2025, reflecting stable performance despite subdued business activity [27] - The net interest margin reached 4.7% for the quarter and 4.8% as of June 2025, maintaining a leading position in the industry [30] Business Line Data and Key Metrics Changes - Customer income grew by 2.7% year-on-year to CLP 626 billion, driven by a 6.2% increase in net income from loans and an 8.1% rise in fee income [28] - Non-customer income declined to CLP 137 billion from CLP 160 billion in the same period last year, primarily due to lower inflation revenues [28] - Total loans reached CLP 39.4 trillion as of June 2025, reflecting an annual increase of 3.9% [31] Market Data and Key Metrics Changes - The Chilean economy showed signs of recovery with GDP growth of 2.3% year-on-year in Q1 2025, above the estimated long-term trend of around 2% [6] - The unemployment rate stood at 8.9% in June 2025, up 60 basis points from a year earlier, indicating mixed signals in the labor market [8] - Inflation remained above the central bank's 3% target, with a headline rate of 4.1% in June, down from 4.9% in March [9] Company Strategy and Development Direction - Banco de Chile's strategy focuses on supporting the development of Chile through efficiency, collaboration, and a customer-first mindset [20] - The bank aims to achieve sustainable, long-term industry-leading profitability and market leadership in both commercial and consumer loans [21] - Recent initiatives include enhancing digital capabilities, integrating subsidiaries for operational efficiency, and participating in state-guaranteed credit programs [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the bank's fundamentals despite ongoing global uncertainties and political dynamics in Chile [5][49] - The GDP forecast for 2025 was revised upwards to 2.3%, reflecting stronger-than-expected economic performance early in the year [48] - Expected credit loss ratio is projected to be approximately 1% for the year, indicating a gradual improvement in asset quality as economic activity gains momentum [50] Other Important Information - The bank's common equity Tier 1 ratio reached 14%, positioning it among the top performers in the industry [41] - Total provisions amounted to CLP 1.5 trillion, with a coverage ratio of 252%, reflecting a conservative approach to credit risk management [46] - Operating expenses increased by 3% year-on-year, remaining below the inflation rate of 4.5% over the past twelve months [47] Q&A Session Summary Question: Insights on the political landscape and potential regulatory impacts - Management noted the likelihood of a second round in presidential elections and emphasized the importance of economic growth discussions among candidates [56] - There is a consensus on the need to improve growth, with proposals for lower corporate tax rates and reduced bureaucracy [57] Question: Outlook on net interest margins (NIM) and ROE - Management expects lower interest rates in the future, with a target NIM of around 4.5% to 4.7% in the medium term [59][60] - The aspiration for ROE is to be the leader in the industry, with a focus on enhancing digital platforms and productivity [62] Question: Cost control initiatives and future expense growth - Management highlighted significant cost control measures, including a reduction in branch network and increased digital tool usage, contributing to improved efficiency [76] - The expectation is to maintain an efficiency ratio below 42%, with ongoing efforts to control expenses despite inflation [80] Question: Loan growth outlook and fee income performance - Management indicated a cautious approach to loan growth, with guidance to grow slightly above the industry average of 4% [85] - Fee income has been strong, growing at 8% year-on-year, which is significantly above loan growth [85]

Financial Performance - Banco Santander Chile's net income attributable to shareholders for 6M25 was Ch$550355 million, a 628% increase year-over-year[65] - Net interest income for 6M25 reached Ch$1033547 million, up 260% year-over-year[65] - Total fees for 6M25 amounted to Ch$2967 billion, reflecting a 132% increase year-over-year[25,65] - Results from financial transactions totaled Ch$1342 billion, a 238% increase year-over-year[25,65] Balance Sheet and Loan Portfolio - Total loans reached Ch$40943 billion in 6M25, showing a 10% increase year-over-year[66] - Mortgage loans totaled Ch$17487 billion, a decrease of 01% year-over-year[66] - Commercial loans amounted to Ch$17545 billion, up 13% year-over-year[66] - Consumer loans reached Ch$5896 billion, increasing by 34% year-over-year[66] Efficiency and Asset Quality - The efficiency ratio was 353% in 6M25, positioning the bank as best in class[32,33,34] - The recurrence rate was 619%[34,35] - The NPL (Non-Performing Loans) ratio was 30%[40,79]

Key Takeaways BOH posted Q2 EPS of $1.06, beating estimates and rising from 81 cents a year earlier.Higher NII and fee income drove an 11.2% revenue rise, while expenses and asset quality worsened.Loans and deposits dipped nearly 1%, while credit loss provisions jumped 35.4% year over year.Bank of Hawaii Corporation (BOH) reported second-quarter 2025 adjusted earnings per share (EPS) of $1.06, beating the Zacks Consensus Estimate of $1.04. The bottom line compared favorably with 81 cents in the year-ago qua ...

Financial Data and Key Metrics Changes - The company reported GAAP earnings per share of $0.41 and core earnings per share of $0.32, representing an increase of 12878% year over year [5] - GAAP net interest margin expanded by three basis points quarter over quarter to 2.54%, while core net interest margin also increased by three basis points to 2.52% [6] - Average total deposits increased by 6% year over year and 1% quarter over quarter to $7.6 billion [6] - Pre-provision pre-tax net revenue reached $23.1 million, the highest level since 2022 [6] - Tangible common equity grew by 25 basis points to 8.04% [8] Business Line Data and Key Metrics Changes - Core net interest income increased by $10.5 million year over year, driven by loan yields increasing by seven basis points [10] - Non-interest bearing deposits grew by 6% year over year and 2% quarter over quarter [12] - New checking account openings increased by 21% year over year and 8% quarter over quarter, indicating strong customer acquisition [12] Market Data and Key Metrics Changes - The bank's commercial real estate concentration decreased to under 500% for the first time since Q3 2023 [7] - Non-performing loans in the multifamily portfolio halved to 50 basis points, down from 101 basis points in the previous quarter [19] - Criticized and classified loans in the multifamily segment improved to 73 basis points from 116 basis points [19] Company Strategy and Development Direction - The company focuses on improving profitability, maintaining credit discipline, and preserving strong liquidity and capital [8] - The asset repricing strategy is expected to drive net interest margin expansion, with real estate loans projected to reprice approximately 160 basis points higher through 2027 [9] - The company is committed to serving the Asian American communities, with deposits in this market growing to $1.4 billion, reflecting a 12.4% compound annual growth rate since Q2 2022 [26] Management's Comments on Operating Environment and Future Outlook - Management expects total assets to remain stable, with loan growth being market-dependent [27] - The company anticipates some seasonal deposit outflows in Q3 but expects recovery in Q4 [27] - The effective tax rate is expected to be lowered to a range of 24.5% to 26.5% for the remainder of 2025 [28] Other Important Information - The company maintains a strong liquidity position with approximately $4 billion of undrawn lines and resources at quarter end [25] - The reliance on wholesale funding is limited, with uninsured and uncollateralized deposits representing only 17% of total deposits [25] Q&A Session Summary Question: What caused the $400 million decline in deposits? - Management indicated that the decline was mostly seasonal, related to government deposits moving out, and expected a recovery later in the year [34][35] Question: What would happen to margins if the Fed cuts rates? - A return to a more normal yield curve would be positive for the company, potentially leading to a couple of basis points improvement in margins [38][39] Question: Will there be buybacks in the second half of the year? - Management stated that they are focused on building capital stronger before considering buybacks, prioritizing profitable growth and dividends [44] Question: What drove the decrease in expense outlook? - The decrease was attributed to managing expenses tightly and some accruals related to incentive compensation [50] Question: What is the outlook for non-CD deposit repricing? - Management noted limited opportunities to reduce funding costs until the Fed makes a move, with most support for net interest margin expected from asset-side loan repricing [56]

Financial Performance - GAAP NIM increased 3 bps QoQ to 2.54%[6] - Core NIM expands 3 bps QoQ to 2.52%[6] - Average total deposits increased 5.7% YoY and 0.6% QoQ to $7.6 billion[6] - Core NII FTE increased by $10.5 million YoY[11] - PPNR of $23.1 million in 2Q25 at highest level since 3Q22[6] Asset Quality - Net charge-offs totaled 15 bps for 2Q25, less than 1 bp of net recoveries in 2Q24, and 27 bps in 1Q25[6] - NPAs to assets of 75 bps at 2Q25 compared to 61 bps at 2Q24 and 71 bps at 1Q25[6] - Criticized and Classified loan to total loans of 108 bps, down from 113 in 2Q24 and 133 in 1Q25[6] Capital and Liquidity - Tangible common equity ratio of 8.04%, up 25 bps QoQ[6] - Liquidity remains strong with $3.6 billion of undrawn lines and resources at quarter end[6] - Asian Communities – Total Loans $740.6 million and Deposits $1.36 billion[39] Loan Portfolio - Multifamily portfolio size is $2.5 billion with NPLs/Loans at 50 bps[29] - Investor CRE portfolio size is $2.0 billion with NPLs/Loans at 33 bps[33]

Financial Data and Key Metrics Changes - The bank's earnings accelerated as forecasted, with a significant increase in loan production from approximately $2 billion in Q1 to over $3 billion in Q2, representing a 57% increase [5] - Adjusted for merger costs, the return on assets was 1.45% and return on tangible common equity was nearly 20% in Q2 [7][9] - The tangible book value per share increased by 8.5% year-over-year to $51.96, despite the dilutive impacts of the merger [14] Business Line Data and Key Metrics Changes - Loan production in Texas and Colorado increased by 35%, with non-PCD loans growing by about $200 million [5] - Net interest income grew by $33 million over Q1, with a cost of deposits improving to 1.84%, a five basis point improvement [10] - Non-interest income remained stable at $87 million, with improvements in correspondent business offset by a slight decline in mortgage revenue [12] Market Data and Key Metrics Changes - The loan pipeline increased significantly, with a 45% increase in Q1 and an additional 31% in Q2, indicating strong momentum in loan origination [29] - The bank's asset size reached $66 billion, positioning it well for investments in technology and risk management [6] Company Strategy and Development Direction - The company aims to build a strong presence in the fastest-growing markets by focusing on Texas and Colorado, which are seen as key geographies for growth [6] - The management emphasized the importance of organic growth and the potential for share repurchases, given the current capital position [14][85] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the improving yield curve and its potential to accelerate organic growth [9] - The outlook for net interest margin (NIM) is expected to remain between 3.8% and 3.9% for the remainder of the year, with potential for improvement in 2026 [24] Other Important Information - The board approved an 11% increase in dividends, reflecting confidence in earnings growth and capital levels [9][84] - The integration of Independent Financial was completed successfully, allowing the company to focus on growth opportunities [6] Q&A Session Summary Question: Outlook for margin and potential for expansion - Management indicated that the net interest margin was strong at 4.02% and expects it to remain stable with no significant changes to guidance [20][22] Question: Loan growth and paydowns - Paydowns returned to normal levels in Q2, and the company is funding around 60% of loan production, indicating potential for future growth [36] Question: Interest rate sensitivity and NIM guidance - Management expects a 1-2 basis point improvement in overall margin for every 25 basis point cut, with a focus on legacy loan repricing [39][41] Question: Capital allocation and buyback opportunities - The company is considering share repurchases due to its strong capital position and believes in the potential for consistent dividend increases [84][86]