China International Capital Corporation (CICC) has released a research report forecasting that the mainland banks under its coverage will see a 3% year-on-year growth in revenue and a 2% increase in net profit attributable to shareholders for the first quarter of this year. Net interest income is expected to grow by 2.4% year-on-year, showing continued improvement compared to the 1.5% growth in the fourth quarter of last year. However, uncertainty surrounding other non-interest income has increased.

CICC projects that net interest income for the listed mainland banks it covers will rise by 2.4% year-on-year in the first quarter, making it the largest contributor to the growth in net profit attributable to shareholders, accounting for 4.3 percentage points. Leading regional banks, which balance scale expansion with improvements in net interest margins, are expected to achieve faster growth in net interest income at 11%, contributing more significantly to net profit at 17.6 percentage points.

Regarding net interest margins, CICC estimates that the covered banks will experience a year-on-year decline of 9 basis points in the first quarter, narrowing from the 11 basis point drop in the fourth quarter. The firm judges that the first quarter may see the largest year-on-year contraction in net interest margins for the year, primarily because the impact of LPR cuts in 2025 still needs to be fully realized. The concentrated maturity of high-cost deposits is expected to be a key supportive factor for net interest margins. On an individual stock level, CICC recommends focusing on banks with unique catalysts on the asset side, such as Bank of China (03988) and Ping An Bank Co., Ltd. (000001), or those with significant room for improvement in liability costs, such as Hua Xia Bank Co., Limited (600015).

In terms of scale growth, banks maintained relatively rapid expansion in the first quarter, with corporate lending being the main driver, ensuring the core engine for net interest income growth remains stable. CICC suggests that investors in the mainland bank stock sector focus on the following categories in April: first, banks with high and sustainable dividends whose current valuation levels remain attractive to allocation funds, including CM BANK (03968) and large state-owned banks; second, undervalued stocks with marginal improvements in performance, such as Ping An Bank and Hua Xia Bank; third, leading regional banks expected to outperform the industry in full-year results, including Bank Of Jiangsu Co., Ltd. (600919) and Chongqing Rural Commercial Bank Co., Ltd. (601077); and fourth, banks undergoing asset quality clearance or benefiting from event-driven catalysts, such as MINSHENG BANK (01988) and Industrial Bank Co., Ltd. (601166).