As of August 23, a total of eight banks have released their interim results or earnings preannouncements, with regional city commercial banks in high-quality areas demonstrating notable earnings resilience. In a period of heightened market volatility, the recommended strategy for bank sector allocation is to prioritize city commercial banks first, followed by large state-owned banks, focusing on three key directions: 1) banks combining strong performance with dividend yield attributes; 2) banks with potential for convertible bond conversion; and 3) if market style balances out in the second half, sector allocation opportunities remain, favoring state-owned giants.
Second-quarter listed banks delivered steady profit growth, with high-quality regional city commercial banks showing exceptional resilience. All eight reporting banks achieved positive year-on-year growth in both revenue and net profit attributable to shareholders. City commercial banks outperformed, with growth rates generally in the double digits, while joint-stock banks saw low single-digit improvements. From a driver perspective, net interest income served as the primary pillar of revenue resilience, while fee-based income and other non-interest income showed divergent trends.
At the individual stock level, Bank of Ningbo stood out with the strongest performance, posting revenue and net profit growth of 11.5% and 12.1% year-on-year, accelerating by 1.3 and 1.8 percentage points respectively compared to the first quarter. Bank of Nanjing, Bank of Chongqing, and Bank of Jiangsu also sustained robust high growth, with revenue expanding approximately 9%-11% and profits around 8%-10%.
City commercial banks continued their rapid balance sheet expansion, primarily driven by corporate lending. These banks maintained a strong expansion trajectory, with asset growth ranging from 11% to 18% and loan growth between 13% and 17%, while joint-stock banks grew at low single-digit rates. Among them, Bank of Jiangsu led in asset growth at 17.2% year-on-year, while Bank of Ningbo posted standout loan growth of 16.5%. On a marginal basis, most banks saw asset and loan growth moderate in the second quarter following rapid expansion in the first quarter. Bank of Ningbo's first-half asset and loan growth rates stood at 13.8% and 16.5% year-on-year, improving by 0.1 and 0.9 percentage points from the first quarter. Structurally, loan growth for most banks was predominantly driven by corporate business, with retail contributions remaining weak.
Net interest margin trends are stabilizing, with net interest income showing strong resilience. Driven by improvements in liability costs, most banks saw their net interest margins stabilize. Specifically, Jiangyin Rural Commercial Bank and Ping An Bank improved their margins by 3 basis points and 1 basis point respectively in the first half compared to the first quarter, while Bank of Chongqing's margin recovered by 7 basis points from 2025 levels. Bank of Ningbo, Bank of Jiangsu, and Bank of Nanjing saw margins decline by 3-9 basis points from 2025 levels, with the pace of decline expected to narrow quarterly. The four city commercial banks all recorded net interest income growth exceeding 10% year-on-year in the first half, with Bank of Nanjing leading at 40.2%, sustaining strong momentum. Bank of Chongqing and Bank of Jiangsu grew by 26.0% and 12.0% respectively, improving by 13.2 and 4.7 percentage points from the first quarter.
Non-interest income performance was mixed. In fee-based income, Bank of Ningbo was the standout, surging 53.9% year-on-year in the first half, benefiting from strong results at its subsidiaries including Yongying Fund and its wealth management arm. Bank of Jiangsu and Bank of Nanjing saw fee income grow 0.3% and decline 18.5% year-on-year respectively, reflecting structural divergence where wealth management-related businesses performed well, but were dragged by higher expenses and lower underwriting fees. In other non-interest income, Ping An Bank and Bank of Jiangsu maintained positive growth at 8.0% and 1.4% year-on-year in the first half, while Bank of Ningbo's decline narrowed significantly by 16.1 percentage points from the first quarter.
Asset quality remained broadly stable. Most banks saw their non-performing loan ratios hold steady or decline slightly quarter-on-quarter, with Chongqing Rural Commercial Bank, Bank of Nanjing, Bank of Chongqing, and Jiangyin Rural Commercial Bank each down 2, 1, 1, and 1 basis points respectively from the first quarter. Provision coverage levels remained stable with adequate risk absorption capacity. Jiangyin Rural Commercial Bank and Bank of Ningbo increased their provision coverage ratios by 19 and 4 percentage points from the first quarter to 349% and 373% respectively.
Risk warnings: credit demand may be weaker than expected; structural risk exposures could exceed expectations.