China's Listed Banks See Net Interest Margin Recovery as Deposit Repricing Cuts Funding Costs

China's listed banks are seeing signs of recovery in net interest margins, with 19 of 42 A-share lenders reporting stabilization or improvement in the first half, according to Jiemian News. The improvement was driven mainly by a larger decline in funding costs on the liability side rather than higher asset yields, helped by the repricing of high-cost deposits. Jiemian News reported that the average yield on interest-earning assets at the 42 banks fell 32 basis points year on year to 2.98%, while the average cost of interest-bearing liabilities dropped 34 basis points to 1.51%. Agricultural Bank of China said three-year time deposits entered a concentrated repricing cycle, with listed rates falling by as much as 135 basis points, while Bank of Hangzhou said deposit repricing and balance-sheet adjustments helped lift its margin. The average deposit cost ratio at the 42 banks fell 40 basis points to 1.4%, and China Merchants Bank and Postal Savings Bank of China both pushed deposit costs below 1%. The article said the margin recovery may not mark a turning point, because loan yields are still under pressure and the benefit from deposit repricing should fade as more high-cost deposits roll off. China Merchants Bank Vice President Peng Jiamin said the industry still faces downward pressure on margins because credit demand has not turned decisively, deposit repricing is largely complete, and consumer and property demand has not fully recovered. Among the banks that improved, Xi'an Bank posted the biggest rise, with its net interest margin increasing to 1.99% from 1.7% a year earlier. Its corporate loan yield rose 8 basis points to 4.97%. Among the banks that declined, Industrial Bank saw the largest drop, with its margin falling to 1.6% from 1.75% as asset yields fell 42 basis points. China Everbright Bank and Xi'an Bank had the highest margins among listed banks, while China Merchants Bank ranked fourth at 1.83%.