CICC: ICBC H-shares are preferred. The repricing of over 5 trillion RMB in deposits alleviates pressure on net interest margins.

China International Capital Corporation (CICC) released a research report, maintaining a "buy" rating on the H shares of the domestic banking sector, and listing a specific recommendation list, with Industrial and Commercial Bank of China (01398) as the top pick, believing that its valuation is relatively attractive compared to peers; the report also recommends buying Agricultural Bank Of China (01288), China Merchants Bank (03968), China Construction Bank Corporation (00939), Postal Savings Bank Of China (01658), and CEB BANK (06818). CICC predicts that as more than 50 trillion yuan of long-term time deposits are set to mature in 2026, the cost of bank liabilities is expected to see a repricing window, which will significantly alleviate the downward pressure on industry net interest margins that has been troubling the sector in recent years. According to data from the People's Bank of China, as of the end of June 2025, the total amount of renminbi deposits in mainland China reached 320.17 trillion yuan. The proportion of one to five year term deposits held by the four major state-owned commercial banks, which had peaked at 24.5% at the end of 2024, fell to 23.5%, indicating initial signs of improvement in deposit structure. The report estimates through reverse calculation models that the four major banks will have 20.37 trillion yuan of long-term deposits maturing in 2026, an increase of 2.03 trillion yuan from 18.34 trillion yuan in 2025. If calculated based on the proportion of the four major banks accounting for around 40% of the total national deposits, the total amount of long-term time deposits due in 2026 in the country will reach 50.93 trillion yuan, an increase of 5.08 trillion yuan from 2025. 2026 will mark the largest repricing window of liabilities in the history of the banking industry. The report emphasizes that this will not only slow down the decline in net interest margins, but also create conditions for the recovery of bank profitability. Despite facing pressure on interest margins, the report believes that the fundamentals of the banking sector will remain strong in 2026. Commercial banks covered by CICC are expected to achieve a slight year-on-year increase in net profit attributable to shareholders in 2025, with a potential increase of about 2% in 2026.