19 of 42 A-share listed banks see net interest margin stabilize in H1 2026

In the first half of 2026, 19 of the 42 A-share listed banks achieved a stabilization or rebound in net interest margins, accounting for nearly half of the total. In the same period over the previous three years, only one to two listed banks had seen such an improvement. The rebound was mainly due to the cost of interest-bearing liabilities falling more than the yield on interest-earning assets.

During the period, the average yield on interest-earning assets of the 42 listed banks was 2.98%, down 32 basis points year-on-year, with 25 banks falling below 3%. The average cost of interest-bearing liabilities was 1.51%, down 34 basis points, while the average deposit cost was 1.4%, down 40 basis points.

The repricing of deposit rates and loan rates has been out of sync. The rate on newly issued loans has fallen steadily from 4.34% at the start of 2023 to 3.05%, a cumulative decline of about 130 basis points. In early 2023, the three-year deposit rate at large state-owned banks was 2.6%; by 2026, after repricing at maturity, it had fallen to 1.25%, a decline of 135 basis points. The repricing of high-rate deposits at maturity was the main reason for the decline in funding costs. China Merchants Bank and Postal Savings Bank of China have seen their deposit costs fall below 1%, at 0.97% and 0.98%, respectively. China Merchants Bank has accumulated demand deposits through its wealth management business, while Postal Savings Bank relies on nearly 40,000 outlets to absorb deposits in rural and county areas.

On the asset side, weak credit demand and intense competition have kept asset yields declining. On the liability side, the scale of high-rate deposits maturing will shrink, and the interest rate gap after repricing will narrow, reducing the contribution of deposit repricing to net interest margins. Since 2024, commercial banks have sharply cut three-year and five-year deposit rates; some banks now offer medium- and long-term deposit rates lower than one-year rates, and new medium- and long-term deposits have declined.

Among the 19 banks with improving net interest margins, Bank of Xi'an saw the largest increase, rising from 1.7% in the first half of 2025 to 1.99% in the first half of 2026, up 29 basis points. Its corporate loan yield rose 8 basis points against the trend to 4.97%. Among the 23 banks with declining net interest margins, Industrial Bank saw the largest drop, from 1.75% to 1.6%, down 15 basis points, as its liability costs fell 32 basis points but asset yields fell 42 basis points. In absolute terms, Changshu Bank had the highest net interest margin at 2.48%, the only listed bank above 2%; Bank of Xi'an ranked second, and China Merchants Bank ranked fourth at 1.83%.