CICC: Chinese Major Bank Stocks Deliver 32% YTD Returns, Outperforming Global Peers
nashnova research
CICC's latest report shows China's major bank stocks have averaged a 32% return year-to-date, while global systemically important banks have fallen 8% on average since August. This means → Chinese and overseas bank stocks are diverging sharply, driven by fundamental mismatches in fiscal policy, interest rates, and credit cycles.
Both governments are spending — why does it hit banks so differently?
Overseas fiscal expansion plus rising energy prices are pushing up inflation expectations. Markets fear further rate increases — squeezing banks on both bond losses and credit costs.
China's fiscal spending, by contrast, channels a large share toward resolving legacy risks: of the roughly RMB 14 trillion in broad government financing for 2026, about RMB 3.1 trillion (≈22%) goes to implicit-debt swaps, local-government debt resolution, and financial-institution capital injections.
This means → overseas banks' balance sheets absorb the rate pressure from fiscal expansion, while Chinese banks' balance sheets are being actively de-risked by fiscal policy.
High rates felt good at first — when did they become a threat?
Early in the rate-hiking cycle, wider spreads boosted European and US bank earnings. But with rates staying elevated, unrealised bond losses and credit costs are biting back.
In plain terms = bonds banks bought during the low-rate era are now deeply underwater. US banks held roughly $326.7 billion in unrealised securities losses at end-Q2 2026 — 5.5% of amortised cost. Silicon Valley Bank's 2023 collapse already demonstrated how this chain reaction works.
Chinese banks operate in a relatively stable rate environment. Bond-investment gains contributed about 1.7 percentage points of annual profit growth on average from 2023 to H1 2026. But with rates now low, room to realise remaining paper gains is narrowing.
Credit demand: who is still expanding, and who is still waiting?
Overseas bank lending remains in expansion mode, driven by lagged effects of earlier rate cuts, inflation-fuelled working-capital needs, and AI and other emerging-sector investment.
CICC flags three overseas credit-risk hotspots: commercial real estate (high financing costs plus rising vacancy), private-credit redemption pressure, and highly leveraged AI projects facing return and refinancing risk.
China's credit demand remains subdued; new financing leans on policy-supported sectors such as infrastructure and manufacturing. NPL ratios are broadly stable, but a full credit-cycle recovery still needs further fiscal and property-policy support.
Higher earnings, higher valuations — who offers the better deal?
In H1 2026, US bank net income grew roughly 21% year-on-year with ROE at about 13%; major eurozone banks grew about 11% with ROE near 11%; Chinese listed banks grew only about 3%, with ROE around 10% and drifting lower.
Yet the valuation gap is wider still: Chinese listed banks trade at roughly 0.6× book on the A-share market and 0.5× book in Hong Kong, versus 0.8× and above for Western peers — some large Western banks reach 1.5–3.0×.
This means → overseas banks' stronger earnings are already largely priced in, while Chinese bank stocks' depressed valuations leave room for relative upside.
What must hold true for CICC's thesis to play out?
CICC expects China's major banks to sustain stable net-profit growth over the next one to two years, with room for improvement if fiscal stimulus revives credit demand.
Low valuations, steady dividends, and persistent demand for high-yield assets from insurers and other long-duration capital — these three pillars underpin CICC's medium-to-long-term relative-return case.
This reflects one critical verification point: whether net interest margins can stabilise. If margins keep compressing, the appeal of low valuations and high dividends will be eroded by falling earnings.
市场有风险，内容仅供研究参考，不构成投资建议。