China’s Major Banks to Face Continued Pressure on NIMs Amid Rate Cuts

The net interest margin (NIM) outlook in China remains challenging. Recently, China’s central bank, the People’s Bank of China trimmed, the one-year loan prime rate (LPR) to 3.35%, and the five-year rate to 3.85%, putting added pressure on banks with declining NIMs. Five of China’s largest banks are expected to see NIM continue shrinking in 2024 amid a slowing economy and pressures of declining interest rates. Based on Visible Alpha consensus, the average net interest margin (NIM) across leading Chinese banks by assets – Industrial & Commercial Bank of China (SHA: 601398), China Construction Bank (SHA: 601939), Agricultural Bank of China (SHA: 601288), Bank of China (SHA: 601988), and Postal Savings Bank of China (SHA: 601658) – is expected to decline to 1.51% in 2024, down from 1.7% last year. NIMs are expected to continue their downward trajectory into 2025, albeit at a more moderate pace.