Bank of Ningbo posts strong results, raises dividend payout ratio by 5 percentage points; Goldman Sachs maintains Buy

Overview

This report is Goldman Sachs' review of Bank of Ningbo's 2025 and 1Q26 results. The report believes the company's earnings growth was overall strong, with net interest income maintaining a relatively high growth rate driven by corporate loan expansion; fee income stood out within non-interest income, and improved operating efficiency drove pre-provision operating profit growth faster than revenue growth. Meanwhile, the company maintained a high bad-loan provision coverage ratio and significantly increased its dividend payout ratio.

Core views

Goldman Sachs' core view is that Bank of Ningbo's fundamentals remain resilient: loan growth stays relatively strong, net interest margin shows signs of stabilization, a lower cost-to-income ratio improves operating leverage, provisioning remains prudent, and a higher dividend payout ratio strengthens shareholder returns. Based on 1Q26 results, Goldman Sachs slightly adjusts its 2026E-2028E pre-provision operating profit and net profit forecasts and maintains a Buy rating.

Analysis framework

The report mainly evaluates Bank of Ningbo's performance across multiple dimensions, including net interest income, non-interest income, operating expenses, provisions and asset quality, capital and dividends, and valuation, and incorporates the latest results into its 2026E-2028E earnings forecasts. The valuation method uses a 2027E target P/PPOP multiple and refers to the median of historical cycles.

Methodology notes

• Valuation methodsP/PPOP valuation

  2027E P/PPOP multiple valuation

  Goldman Sachs applies a 2027E target P/PPOP multiple of 4.25x, close to the cycle median of 4.23x since 2014, deriving a target price of Rmb41.29.

• factor_profileGS Factor Profile

  Comparison of growth, financial returns, valuation multiples, and composite factors

  GS Factor Profile compares the company's key metrics with covered stocks and industry peers to generate growth, financial return, valuation multiple, and composite percentiles, supplementing investment judgment.

• m_and_aM&A Rank

  Probability ranking for mergers and acquisitions

  The report discloses Bank of Ningbo's M&A Rank as 3, indicating a low probability of being acquired, and this rank is typically not included in the target price.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Bank of Ningbo (002142.SZ)

  Covered name; Goldman Sachs maintains a Buy rating and raises the target price

  Strengths

  Strong loan growth, signs of stabilizing net interest margin, high growth in fee income, lower cost-to-income ratio, high provision coverage ratio, and a higher dividend payout ratio.

  Weaknesses

  Relatively weak retail loan growth, non-interest income affected by volatility in investment income and FX gains/losses, and 1Q26 net profit slightly below Goldman Sachs' forecast.

  Comparison

  The report compares the company with China Financials and Asia ex. Japan covered stocks through GS Factor Profile, and uses the median P/PPOP valuation cycle since 2014 as the reference for the target multiple.

  Risks

  Net interest margin below expectations, deterioration in asset quality, larger-than-expected investment losses, and deposit outflows.

Key data

• 2025 PPOP/NPATRmb47bn / Rmb30bnUp 13%/8% YoY, in line with the pre-announced results.
• 1Q26 PPOP/NPATRmb15bn / Rmb8bnUp 15%/11% YoY, versus Goldman Sachs forecasts of +2%/-2%, respectively.
• 2025/1Q26 net interest income growth+11% / +14% YoYMainly driven by strong corporate loan expansion and gradually stabilizing net interest margin.
• Corporate loan growthapproximately +30% YoYSupported total loan growth of 17%/16% YoY in 2025/1Q26, respectively.
• 1Q26 non-interest incomeRmb5.6bn17% below Goldman Sachs' forecast; among this, fee income was Rmb2.6bn, up 82% YoY.
• 1Q26 cost-to-income ratio26.7%3 percentage points below Goldman Sachs' forecast, reflecting improved expense control.
• 1Q26 bad-loan coverage ratio369%Still at a relatively high level, but 11 percentage points below Goldman Sachs' forecast.
• 2025 dividend payout ratio27%Raised by 5 percentage points YoY, with DPS at Rmb1.2, up 33% YoY.
• Target priceRmb41.29Previous target price was Rmb36.49, an increase of about 13%.
• Market capitalizationRmb213.3bn / $31.2bnKey data disclosed in the report.

Impact & implications

The report has a positive investment implication for Bank of Ningbo: against a backdrop of weak industry credit demand, the company's loans still maintain relatively fast growth, and stabilizing net interest margin together with improved cost efficiency supports earnings resilience; the higher dividend payout ratio enhances total return appeal. However, investors still need to monitor risks such as net interest margin, asset quality, volatility in investment income, and deposit outflows.

Risks

• Net interest margin performance weaker than expected.
• Deterioration in asset quality or a rise in bad-loan formation.
• Investment losses exceed expectations, dragging on non-interest income.
• Deposit outflows affect funding stability and funding costs.
• Rising bad-loan pressure related to real estate and mortgage loans.

What to watch

• The trajectory of net interest margin in 2026 and loan growth plans amid weak industry credit demand.
• The drivers of strong fee income growth and its contribution to 2026 earnings.
• The reasons for and sustainability of continued improvement in the cost-to-income ratio.
• The trend in bad-loan formation and the target provision coverage ratio level.
• The main considerations behind the significant increase in the dividend payout ratio and future shareholder return plans.