Bank of America Securities: Inner-Market H-shares outperformed expectations in the first quarter, and we are very bullish on Industrial and Commercial Bank of China (01398) and China Construction Bank Corporation (00939).

Bank of America Securities released a research report stating that the average net profit growth of H-share listed Chinese banks in the first quarter improved from 0.7% last year to 1.1%. The bank maintains a constructive view on the industry, citing stable performance of dividend yield around 5%, bottoming out of income growth, defensive nature, and regulatory moat to resist AI impact. Industrial and Commercial Bank of China (01398) and China Construction Bank Corporation (00939) are the top picks, while China Merchants Bank (03968) and Postal Savings Bank of China (01658) are the least favored. Pre-provision operating profit (PPOP) accelerated significantly by an average of 9.2% year-on-year, compared to 1.5% last year. Among them, Bank of China (03988) and Agricultural Bank of China (01288) saw an increase in net profit of 4% to 4.5% year-on-year, while Postal Savings Bank, China Construction Bank and Agricultural Bank saw a year-on-year increase in PPOP of 13% to 19%. During the period, the average net interest margin rebounded by 3 basis points to 1.43% quarterly, which was a major positive surprise; net interest income increased by 2.8% quarterly. Among them, China Construction Bank, China Minsheng Banking Corp., Ltd. (01988), Agricultural Bank of China saw an increase in net interest margin by 6 to 9 basis points, while China Merchants Bank and CITIC BANK (00998) recorded a decrease of 2 to 3 basis points.