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China Banks Summary

Core Content

This report provides an analysis of the financial performance and trends of Chinese banks in May 2025, highlighting key metrics such as total social financing (TSF), loan growth, deposit growth, and the implications for credit and deposit dynamics.

Main Points

1. Total Social Financing (TSF) Growth

• TSF New Additions: Rmb 2.3tn in May 2025, compared to Rmb 2.1tn in May 2024.
• TSF Balance Growth: 8.7% yoy in May 2025, down from 8.4% in May 2024.
• Drivers of TSF Growth:
  • Government Bonds: Net issuance of Rmb 1.5tn, up from Rmb 1.2tn in May 2024, accounting for 64% of new TSF.
  • Corporate Bonds: Issuance of Rmb 150bn in May 2025, up from Rmb 29bn in May 2024, continuing the trend from April due to low bond market rates.

2. Loan Growth

• New Loans: Rmb 0.6tn in May 2025, down from Rmb 0.9tn in May 2024.
• Corporate Loans: Increased by Rmb 0.5tn, but yoy growth was negative at Rmb -0.2tn, due to slower medium- and long-term capex and local government implicit debt swaps.
• Retail Loans: Moderate growth of Rmb 54bn, with short-term loans declining by Rmb -21bn, indicating weak consumer spending.
• Medium- and Long-term Loans: Increased by Rmb 75bn, likely due to liquidity support from RRR and rate cuts, despite weak property sales.

3. Deposit Growth

• New Deposits: Rmb 2.2tn in May 2025, up from Rmb 1.7tn in May 2024.
• M1/M2 Growth: 2.3% / 7.9% yoy, up from 1.5% / 8.0% in April 2025, reflecting improved liquidity after RRR and rate cuts.

4. Outlook and Implications

• Credit Growth: Expected to remain weak in 2Q due to tariff uncertainty.
• Retail Loan Growth: Expected to be driven mainly by mortgages, with non-mortgage retail loans still weak due to rising retail risks.
• NIM Impact: Asymmetric rate cuts are positive for net interest margin (NIM), with the decline expected to narrow this year.
• Asset Quality: Main pressure from retail, but some banks show stabilization in retail non-performing loan (NPL) formation.
• Fee Income: May improve sequentially, while investment income is expected to remain under pressure due to a high base last year.

Key Takeaways

• TSF Growth Accelerated: Mainly driven by government bond issuance and corporate bond rebound.
• Credit Growth Slowed: Corporate loan growth was dragged down by weaker capex and local debt swaps; retail loan growth was moderate.
• Deposit Growth Improved: Benefiting from liquidity measures and a low base effect.
• M1/M2 Growth Increased: Reflecting better liquidity conditions.
• Sectoral Trends:
  • Corporate Bonds: Continued growth, supported by low market rates.
  • Government Bonds: Strong growth, contributing significantly to TSF.
  • Retail Loans: Mixed performance with short-term loans declining and medium- to long-term loans rising.
  • Non-bank FIs Deposits: Increased significantly, suggesting stronger liquidity from these sectors.

Investment Considerations

• Profit Growth: Most banks saw negative profit growth in 1Q 2025.
• EPS Dilution: Caused by large SOE bank refinancing.
• Preference for DPS Stability: Focus on full-year 2025 EPS growth and banks that can maintain dividend per share (DPS), such as CMB and BONB.
• M&A Rank: Used to score companies on the likelihood of being acquired, with ranks 1 to 3 indicating high, medium, and low probability respectively.

Additional Notes

• GS Factor Profile: Provides investment context by comparing key attributes like Growth, Financial Returns, and Multiple to the market and sector peers.
• Quantum Database: Offers detailed financial data for in-depth analysis.
• Regulatory Disclosures: Include information on investment banking relationships, ownership conflicts, and analyst compensation, ensuring transparency and compliance across jurisdictions.

Exhibits

• Exhibit 1: TSF new additions breakdown.
• Exhibit 2: M1/M2 growth vs. TSF growth.
• Exhibit 3: May 2025 loan and deposit summary.
• Exhibit 4: May 2025 TSF summary.

Ratings and Coverage

• Buy (B), Neutral (N), Sell (S): Ratings are based on total return potential relative to the coverage universe.
• Not Rated (NR): Applied when Goldman Sachs is involved in a merger or strategic transaction.
• Early-Stage Biotech (ES): No rating assigned for companies without Phase II clinical trial results or distribution licenses.
• Rating Suspended (RS): No sufficient fundamental basis for rating.
• Coverage Suspended (CS): Goldman Sachs has suspended coverage of the company.
• Not Covered (NC): Goldman Sachs does not cover the company.

Distribution

• Research is distributed by Goldman Sachs Global Investment Research across various jurisdictions, including Australia, Brazil, Canada, Hong Kong, India, Japan, Korea, New Zealand, Russia, Singapore, and the United States.
• Approved by Goldman Sachs International for distribution in the United Kingdom and the European Economic Area.