China’s six largest state-owned banks reported simultaneous growth in revenue and net profit for the first half of the year, marking the first such occurrence since 2022. The results, released last week, reflect tentative signs of stabilization in net interest margins (NIM), which had been under pressure for two years.

The banks—Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB), Agricultural Bank of China, Bank of China (BOC), Bank of Communications (Bocom), and Postal Savings Bank of China (PSBC)—collectively generated operating income exceeding 2 trillion yuan (HK$2.33 trillion) during the period. Combined net profit attributable to shareholders reached approximately 712.6 billion yuan.

Revenue growth ranged from 4 to 11 percent across the six lenders, while net profit increased between 4 and 6 percent. This dual growth is notable, as it marks the first time since 2022 that all six banks reported positive increases in both categories simultaneously.

The improvement was primarily driven by a modest rebound in net interest margin, the difference between earnings on loans and the costs of deposits. After two years of steady compression that pushed the industry average down to a record low of nearly 1.4 percent in the first quarter, some banks have begun to see NIM stabilize.

China Construction Bank led the gains with a half-year NIM of 1.37 percent, reflecting a 0.03 percentage point increase from full-year 2025 and a 0.01 point rise from the first quarter. Agricultural Bank’s margin improved by 0.02 points to 1.28 percent versus the previous quarter. ICBC and BOC saw year-on-year increases of 0.01 points to 1.29 and 1.27 percent respectively. Bank of Communications recorded a 0.02 point rise to 1.23 percent, while Postal Savings Bank’s margin declined slightly by 0.07 points to 1.63 percent but remained the highest among its peers.

The stabilization in margins was supported in part by falling deposit payout rates and a shift in liability structures. For instance, CCB reported a 0.34 percentage point decline in time deposit rates compared to early 2026, alongside growth in domestic demand deposits. Agricultural Bank noted a 4.7 percent reduction in interest expenses, attributed to the maturity and repricing of high-cost fixed-term deposits at lower rates, cutting its overall deposit interest costs by 0.21 percentage points since late 2025. ICBC president Liu Jun highlighted that the primary factor was not simply deposit repricing but "more appropriate liability costs and a more optimized liability structure."

Despite these encouraging signals, analysts cautioned against interpreting the data as evidence of a sustained turnaround. Ming Ming, chief economist at Citic Securities, described the margin improvement as a "low-level bottoming phase" rather than a definitive uptrend. He noted that as the benefits from deposit repricing lessen, banks will face ongoing pressure on asset yields, shifting the challenge from liability costs to revenue generation.

Dong Ximiao, chief economist at Merchants Union Consumer Finance, characterized the trend as an “L-shaped bottoming,” warning that the positive impact from lower deposit costs may fade in the second half of the year amid continuing declines in asset yields. Dong emphasized that a structural inflection point would depend on a broader economic recovery and changes in the interest rate environment.

Asset quality remained stable, with Postal Savings Bank maintaining the lowest non-performing loan ratio at 1 percent, while the other five banks ranged between 1.22 and 1.3 percent.

The six state-owned banks collectively proposed interim dividend plans exceeding 220 billion yuan, increasing their payout ratio by about one percentage point to roughly 31 percent.

Investor confidence appeared buoyed by the results, with shares of the Bank of China leading gains in mainland markets, closing more than 5 percent higher on the Shanghai exchange following the announcements.