Summary of the Conference Call on China Banks Industry Overview - The focus is on the **China banking sector**, particularly the performance and outlook of state-owned enterprises (SOEs) and joint-stock banks (JSBs) [10][11][12]. Key Points and Arguments 1. Positive Financial Trends - **2Q25 Results**: Revenue, pre-provision operating profit (PPoP), and net profits turned positive at **2%**, **3%**, and **3%** respectively, compared to negative figures in **1Q25** [10]. - **Fee Income Growth**: Non-interest income (NII) was a significant driver, with fee income increasing by **6% year-on-year** in **2Q25** [10]. 2. Performance Comparison - **SOE vs. JSB**: SOE banks outperformed JSBs with a revenue growth of **5% year-on-year** compared to flat growth for JSBs. SOE banks reported a **14%** increase in fee income [10]. - **Profit Growth**: All six SOE banks reported positive profit growth averaging **2%**, while JSBs showed divergence with some banks reporting negative growth [10]. 3. Dividend Yield and Market Positioning - **Attractive Dividend Yields**: The dividend yield of CSI 300 Banks is **4.3%**, outperforming the **10Y CGB yield** of approximately **1.8%** [10]. - **Potential Inflows**: A shift of **5 percentage points** of household assets from deposits to equities could lead to an inflow of approximately **Rmb 14 trillion**, representing about **15%** of the A-share tradable market [10]. 4. Individual Bank Performance - **CCB**: Reported the best quality print in **2Q25** with revenue and PPoP growth of **11%** and **14% year-on-year** respectively [10]. - **BOC**: Identified as a buying opportunity due to improving overseas asset quality and a muted impact from potential Fed rate cuts [10]. - **CMB**: Expected to benefit from improving retail sentiment, with a higher dividend yield than SOE banks [10]. 5. Valuation and Ratings - **Valuation Summary**: The report includes a detailed valuation summary of H-share and A-share banks, highlighting price-to-earnings (P/E) and price-to-book (P/B) ratios, along with dividend yields and return on equity (ROE) estimates for various banks [11][14]. 6. Regulatory Environment - **"China Value-Up" Initiatives**: Government initiatives aimed at enhancing investor returns and improving the quality of listed companies are expected to support the banking sector [25]. 7. Market Dynamics - **Asset Allocation Trends**: There is an expectation of continued household asset allocation into equities, particularly yield stocks, driven by improving yields in the equity market [27][30]. 8. Risks and Considerations - **Asset Quality Risks**: Ongoing assessments of property-related risks, local government financing vehicle (LGFV) risks, and overall debt risk in China are crucial for understanding the banking sector's stability [5]. Additional Important Insights - **Increasing Southbound Ownership**: H-share banks are seeing an increase in Southbound ownership, which provides solid support to share prices [48]. - **Dividend Spread Analysis**: The report discusses the potential upside in share prices if the dividend spread increases to **200 basis points** [53]. This summary encapsulates the key insights from the conference call regarding the performance, outlook, and strategic positioning of the China banking sector, highlighting both opportunities and risks.

Asia Pacific Equity Research April 2025 This material is neither intended to be distributed to Mainland China investors nor to provide securities investment consultancy services within the territory of Mainland China. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. China Banks The dividend theme is not done yet Asia Financials Katherine Lei AC (852) 2800-8552 katherine.lei@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited/ ...