Recently, the interim reports for the first half of 2026 from 57 Chinese listed banks (covering both A-shares and H-shares) have all been released, bringing their net interest margin (NIM) metrics into focus.

During this period, nearly half of these banks saw their NIM stabilize and recover. However, the trend is marked by clear divergence, as some banks continue to face downward pressure. Notably, a few listed banks have seen their NIM fall below the 1% threshold.

Harbin Bank's NIM Drops Below 1%

Currently, 57 Chinese banks are publicly listed, including six major state-owned banks, ten joint-stock banks (excluding Guangfa Bank and Hengfeng Bank, which are not listed), 29 city commercial banks, and 12 rural commercial banks. Among these, 15 are dual-listed on both A-shares and H-shares, 27 are listed solely on A-shares, and 15 are listed solely on H-shares.

NIM is a critical measure of a commercial bank's ability to generate returns on interest-earning assets and its risk-pricing capability. A persistently low NIM puts significant strain on a bank's profitability. According to a China News Service review of the 2026 interim reports, only two of the 57 banks recorded a NIM above 2% in the first half of 2026. Luzhou Bank led the pack with a NIM of 2.64%, followed by Jiangsu Changshu Rural Commercial Bank with a strong 2.48%.

Seven banks reported a NIM between 1.8% and 2%, including Bank of Xi'an, Yibin Bank, Guizhou Bank, Bank of Changsha, China Merchants Bank, Weihai City Commercial Bank, and Ping An Bank. Conversely, Harbin Bank posted the lowest NIM among the group, with the figure slipping below 1% to 0.98% in the first half of the year. Other banks hovering near the 1% mark include Guangzhou Rural Commercial Bank at 1.07%, and both Jiangsu Zijin Rural Commercial Bank and Bank of Gansu at 1.09%.

Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, commented to China News Service that a NIM below 1% indicates that traditional deposit and loan operations have neared the break-even point, ushering in an era of "micro-profits." He further explained that a NIM below 1% impacts banks in three ways: on the profitability side, interest income may struggle to cover operational costs and bad debt provisions; on the capital side, retained earnings—the primary internal source for replenishing core Tier 1 capital—are weakened, undermining the bank's "self-generation" capacity; and on the business side, the pressure to maintain profits could spur riskier behavior, while credit contraction squeezes financing space for small and micro enterprises.

According to the "Implementation Measures for Qualified Prudential Assessment (2023 Revision)" issued by the interest rate self-regulatory mechanism, the assessment for banking deposit-taking institutions includes 14 indicators across four categories: financial constraints, pricing capability, pricing behavior, and pricing impact. NIM accounts for 10 points out of a total of 140. Bai noted that NIM is a key metric in the market interest rate pricing self-regulatory mechanism, with a desired standard of 1.8%. The lower the NIM, the more points are deducted. Although 1.8% is the regulatory benchmark, the actual industry NIM has deviated significantly from this standard due to persistent LPR cuts and deposit term-deposit trends.

"In the second quarter of this year, the average NIM for commercial banks was 1.41%, which is clearly below the desired level. This is the fundamental reason why regulators have been intensifying efforts to standardize the deposit market and curb 'involutionary' competition," Bai added.

Nearly Half of Banks See NIM Recovery

There are also positive signs in the NIM movements of listed banks. Among the 57 banks, 28 saw their NIM improve compared to 2025, accounting for nearly half. Two banks remained flat, while 27 experienced a decline. Notably, Luzhou Bank, Weihai City Commercial Bank, Jinshang Bank, and Bank of Xi'an each saw their NIM rise by more than 0.10 percentage points year-on-year in the first half of 2026, with increases of 0.15, 0.15, 0.15, and 0.14 percentage points, respectively.

The recovering banks are predominantly city commercial banks, with 14 of them (50% of the total) showing improvement. Joint-stock banks, state-owned banks, and rural commercial banks saw six, four, and four banks recover, respectively. Lou Feipeng, a researcher at Postal Savings Bank of China, attributed the NIM stabilization for city commercial banks to the fact that a large stock of high-interest fixed deposits accumulated earlier has matured and been repriced. This has caused their interest expense rates to fall faster than the decline in asset-side yields. Additionally, their ability to actively reduce high-cost deposits and expand low-cost interbank deposits has contributed to their larger improvements.

Conversely, some banks are still experiencing downward NIM trends. In terms of magnitude, Harbin Bank saw the largest drop in the first half of 2026, falling by 0.22 percentage points from the full-year 2025 level and 0.12 percentage points year-on-year. Industrial Bank, Bank of Jiangsu, and Bank of Zhengzhou also saw notable declines of 0.11, 0.09, and 0.09 percentage points, respectively. Harbin Bank attributed its decline to the maturity of high-priced assets, intense competition in the real economy's credit market, and falling interest rates, which caused the average yield on interest-earning assets to drop faster than the average cost of interest-bearing liabilities.

Looking ahead, Bai Wenxi suggested that a sharp rebound in NIM is unlikely, and the second half of the year will probably see a bottoming-out or slight uptick. This is a necessary phase for the industry's transition from "compensating for price with volume" to "improving quality and efficiency." He further noted that while the benefits from repricing high-interest fixed deposits will continue to be released, the room for further reductions in liability costs is already limited. With insufficient effective credit demand, loan yields remain on a downward path. As high-interest deposits mature, the improvement in liabilities will narrow at the margin. He believes that banks with solid deposit bases and strong customer loyalty will maintain their advantages, while smaller banks reliant on high-cost deposit-taking will continue to face pressure.

Lou Feipeng echoed that NIM is likely to face ongoing downward pressure, but the rate of decline will narrow. The future trend will depend on three factors: first, whether the repricing benefits from high-interest deposits on the liability side can continue; second, whether new lending rates on the asset side can stabilize; and third, the pace of regional economic recovery and improvements in asset quality.