Analyst Note| Iris Tan, CFA |
While there was little surprise in most Chinese banks' first-quarter results, we saw increasing divergence in performance among banks. We believe top-line growth was the key differentiator and this will continue to be reflected in the future growth trend. Net interest margins, or NIMs, remained pressured while credit quality improved. We believe the credit cycle that has hampered Chinese banks’ earnings growth since 2014 is about to turn for the better, while we stay cautious in our credit quality assumptions primarily on short-term pressure from bank wealth management product, or WMP, transition. We expect NIMs to rebound, with a modest decline in full year credit cost from 2020.