By Ziyi Tang and Ryan Woo
BEIJING, March 24 (Reuters) – China’s leading state-owned banks are expected to recover this year from record-low profit margins as the repricing of nearly $8 trillion worth of maturing high-priced time deposits eases pressure on their funding costs.
The top-five state banks, some of the biggest in the world, are expected by analysts to post a drop in profits or lower income growth for 2025 when they release annual results this week as they reeled from a deepening property sector debt crisis and a slowing economy.
While the war in Iran could stoke cost-push inflation and pile pressure on corporates, jobs and wages in the world’s second-largest economy that is already battling deflation, analysts see mitigating factors for lenders this year.
Chief among them is the repricing of high-cost time deposits as the tightly controlled deposit rates have been steadily lowered by the regulator over the past four years with a view to protecting the profit margins of the lenders. That is expected to boost their profits.
“Deposit repricing will be the main driver behind banks’ earnings performance bouncing back in 2026 and should help stabilise their net interest margins,” said Zhang Yiwei, an analyst at China Galaxy Securities.
Zhang estimated around 54 trillion yuan ($7.8 trillion) in time deposits at listed banks will mature in 2026, and rolling over of maturing three-year deposits at current rates will lower costs by roughly 135 basis points compared to 2023 levels.
That is estimated to add about 12 basis points overall to banks’ net interest margins (NIMs), a key gauge of profitability, said Zhang.
Industrial and Commercial Bank of China is estimated to post a 2% decline in 2025 profit, while China Construction Bank is expected to report a 0.4% decline, according to LSEG data.
Agricultural Bank of China is forecast to report a 2.3% net profit growth, though slower than last year. Bank of China (BOC) and Bank of Communications (BoCom) are expected to post growth below 1%, the data showed.
For 2026, three of the five lenders are expected to report a 2.3% to 3.3% year-on-year growth in net profit, with BoC at 0.9% and BoCom at 1.5% according to the data.
STABILISING MARGINS
The repricing of maturing time deposits, which Huatai Securities estimates at a record 50 trillion yuan in 2026, comes at a critical time for banks. China has cut benchmark lending rates repeatedly over the past few years amid weak credit demand, squeezing NIMs to record lows and forcing lenders to seek alternative revenue sources.
“We expect margin pressure to alleviate for Chinese banks and stabilise in 2027, driven primarily by deposit repricing,” said Ming Tan, Director, S&P Global Ratings.
In an effort to control funding costs, some big Chinese banks have removed five-year certificates of deposit, which carry a high yield, from their offerings since late last year as NIM pressure continued unabated.
Interest rates on newly issued three-year time deposits offered by multiple banks have fallen to around 1.5% in early 2026, nearly half the levels seen in 2023.
The domestic banks also plan to steer more money toward technology and innovation-oriented firms, responding to Beijing’s pledge to aggressively adopt AI throughout the economy and dominate emerging sectors.
But with the Middle East conflict muddling the interest rate and economic growth outlooks globally, investors will closely watch comments from the top Chinese banks on credit growth, profit margins, and the asset quality outlook in 2026.
The chances of rate cuts in China will likely further increase as the economy faces shocks from sustained high oil prices as a result of the conflict, analysts at CITIC Futures said in a report.
The stabilising NIMs will offer bigger room for benchmark lending rate cuts this year, the analysts said.
China met its roughly 5% 2025 growth target on an export boom, but structural imbalances, trade frictions and rising geopolitical uncertainty cloud the outlook. A Reuters forecast showed economic growth is likely to slow to 4.5% in 2026.
($1 = 6.8857 Chinese yuan renminbi)
(Reporting by Ziyi Tang and Ryan Woo; Editing by Sumeet Chatterjee and Muralikumar Anantharaman)
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