Guoxin Securities: The core of the banking industry is still the judgment that net interest spreads are stabilizing, maintaining bottoming out and marginal improvement in the performance of listed banks

The Zhitong Finance App learned that Guoxin Securities released a research report saying that the General Financial Supervisory Authority disclosed data on the main regulatory indicators of commercial banks for the second quarter of 2026. The industry's net profit for the first half of 2026 fell slightly by 0.6% year on year. Among them, the growth rate of industry assets declined slightly, net interest spreads stabilized markedly, and the defect rate, attention rate, and provision coverage rate related to asset quality did not change much. The bank believes that the current net interest spreads of banks are clearly showing signs of stabilizing, and that the bank maintains the judgment that the performance of listed banks has bottomed out and improved marginally. However, it should be noted that with revenue pressure being drastically reduced, it is expected that listed banks will give priority to increasing their provisions rather than releasing profits. Therefore, it is expected that this year's profit rebound will be lower than the revenue rebound, and the net profit growth rate of listed banks returning to mother is expected to improve slightly.

Guoxin Securities's main views are as follows:

The overall net profit of the industry declined slightly year-on-year, and the decline was narrower than in the first quarter

Commercial banks achieved net profit of 1.24 trillion yuan in the first half of 2026, down 0.6% year on year, but the decline was narrower than in the first quarter. Looking at banks by type, the net profit of major banks and urban commercial banks increased by 1.6% and 7.4% year on year, respectively, while net profit of stock banks and agricultural commercial banks decreased by 3.4% and 12.6% year on year, respectively.

Due to limited disclosure of regulatory indicators, it is difficult for the bank to disassemble the specific factors of net profit growth. However, judging from the quarterly reports of listed banks, it is expected that changes in net profit growth will still mainly benefit from stabilizing net interest spreads. However, when revenue pressure is reduced, banks may increase their reserves to cope with future uncertainty, so the profit growth rate is still at a low level. Looking at the whole year, the bank is expected to benefit from stabilizing net interest spreads. The overall revenue growth rate of listed banks will pick up compared to last year, but the bank's increase in provision and boosting efforts will cause the net profit growth rate to rise less than the increase in revenue growth.

Asset growth has declined slightly

The total assets of the entire industry increased 7.5% year-on-year in the second quarter of 2026, and the growth rate declined slightly. Looking at banks by type, the growth rate of stock banks rebounded slightly at a lower base, while the asset growth rate of all other types of banks declined.

The decline in bank asset growth is not only affected by weak demand for short-term credit, but is also a long-term trend. Since this year, commercial banks have faced weak demand for credit, so it is normal that the growth rate of industry assets has declined slightly. However, the bank also needs to note that this is a long-term trend. The central bank also pointed out in its newly released monetary policy implementation report for the second quarter that “in recent years, capital-intensive industries such as real estate and infrastructure have continued to adjust, while new productivity is lighter, and demand for loans has naturally declined.” This change in economic structure transformation and upgrading shows a long-term trend. Therefore, the bank expects that the asset growth rate of subsequent industries will hardly rise significantly again, and is expected to remain at the current or even lower level for a long time.

Net interest spread stabilized

The net interest spread for the entire industry in the second quarter of 2026 was 1.41%, a slight increase of 1 bps from the first quarter and a slight decrease of 1 bps from the fourth quarter of 2025. Overall, there are obvious signs that the net interest spread has stabilized. Looking at banks by type, the net interest spreads of different types of banks have stabilized.

The stabilizing net interest spreads of commercial banks mainly benefited from the improvement in debt costs brought about by the repricing of time deposits, which enabled the reduction in bank debt costs to equalize the decline in return on interest-bearing assets. The bank expects commercial banks' net interest spreads to remain stable during the year.

Asset quality indicators have not changed much

Asset quality-related indicators have slightly deteriorated marginally, but the changes are not significant over time. The industry-wide non-performing loan ratio at the end of the second quarter of 2026 was 1.52%, up 1 bps from the end of the first quarter; the target loan ratio at the end of the second quarter was 2.21%, up 4 bps from the end of the first quarter; the provision coverage rate at the end of the second quarter was 203 percent, the same as the end of the first quarter. Looking at banks by type, the non-performing rate of urban commercial banks showed a slight upward trend, while the non-performing rate of other types of banks was relatively stable. The provision coverage rate for various types of banks is also relatively stable.

A more central indicator for judging the quality of a bank's assets is the bad generation rate. According to data from listed banks, the bank's overall asset quality is currently stable. The bad generation rate has remained at around 0.7% for many years, but the bank's current problem is that “loan impairment loss/bad generation” is less than 100%, and the provision plan is not strong enough. Therefore, the bank expects that in the case of stable net interest spreads and revenue growth rebounds, banks will still prioritize supplementary provisions to cope with future uncertainties rather than use them as a priority to release profits. The bank believes this may also be the reason why the overall net profit growth rate of commercial banks is still declining slightly when net interest spreads have stabilized.

Investment advice

The bank maintained its judgment of bottoming out and marginal improvement in the performance of listed banks in 2026. The core reason was that it benefited from stabilizing net interest spreads and therefore maintained the industry's “superior to the market” rating. The bank continues to recommend the “Stable Dividend” and the “High Performance City Commercial Bank”. Among them, the main line for steady dividends focuses on China Merchants Bank, and the main line for high-performing stocks focuses on Bank of Ningbo.

Risk Alerts

If the macroeconomy declines sharply, it may affect the banking industry in many ways. For example, monetary policy easing during the economic downturn may have a negative impact on net interest spreads, and the decline in borrowers' solvency during the macroeconomic downturn may adversely affect the quality of bank assets.