Retail Risk Inflection Point Becoming Clearer, Wealth Management Becoming Ping An Bank’s Main Growth Engine

Overview

This report summarizes information from Ping An Bank’s Retail Open Day. Management emphasized that the retail business philosophy has shifted from pursuing deposit and loan scale and market share to improving risk-adjusted returns, customer value, and long-term operating quality. Three positive trends are emerging simultaneously: a structural decline in funding costs, retail asset quality may have bottomed, and wealth management fee income is accelerating. Goldman Sachs believes these changes are positive for earnings recovery in 2H2026 through lower credit costs and improved asset quality, but they are not yet sufficient to support a more positive rating given still-weak retail demand.

Core views

First, liability-side optimization has structural characteristics. The bank proactively reduced hundreds of billions of yuan in high-cost deposits and inefficient third-party assets, lowered retail deposit pricing from about 2.6% to 1.56%, and increased the proportion of demand deposits to approximately 26% to 27%, helping buffer pressure on net interest margin from declining industry interest rates. Second, retail risk resolution is nearing completion. Management believes 1Q2026 marked an asset quality inflection point, high-risk credit card exposure has been largely cleaned up, and loan issuance has shifted toward higher-yield, lower-risk supply chain, dealer, new energy, and foreign trade customers. Third, wealth management is becoming the main source of growth. Although overall AUM growth is relatively stable, the proportion of fee-generating assets has increased, and wealth management fee income grew 55% year-on-year in 1Q2026. Fourth, the Hong Kong platform mainly serves overseas asset allocation needs of existing mainland clients, with limited short-term profit contribution but enhanced comprehensive service capabilities for high-net-worth clients.

Analysis framework

The report centers on management discussions at the Retail Open Day and conducts a fundamental assessment from seven aspects: retail operating model, funding costs, asset quality, loan structure, wealth management customer and revenue structure, cross-border platform, and valuation risks. It derives the 12-month target price using a 2027E P/PPOP multiple.

Methodology notes

• Valuation MethodP/PPOP Valuation Method

  Measures bank valuation by share price relative to pre-provision operating profit

  The target price is based on a 2027E target P/PPOP multiple of 2.125x, yielding a 12-month target price of Rmb11.80.

• Operating AnalysisRisk-adjusted Return Framework

  Evaluates growth value by comprehensively assessing revenue quality, funding costs, and credit risk

  The report no longer focuses only on deposit and loan scale, but instead emphasizes the share of low-cost operating deposits, loan yield and risk mix, customer asset returns, and sustainable fee income.

• Factor AnalysisGS Factor Profile

  Compares the company with the market and industry peers across growth, financial returns, valuation multiples, and composite metrics

  For financial stocks, growth metrics mainly use forward sales and EPS growth, financial returns mainly use ROE, and valuation multiples mainly use P/E, P/B, and dividend yield-related metrics; the composite percentile is formed by combining growth, financial return, and inverse valuation percentiles.

Asset mapping & comparison

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

• Ping An Bank (000001.SZ)

  Primary research target of the report

  Strengths

  Funding costs have declined significantly; credit card risk has been largely cleared; wealth management fee income is growing rapidly; the bank has approximately 120mn retail customers and support from an integrated financial ecosystem; digitalization and wealth manager productivity are relatively high.

  Weaknesses

  Retail demand remains weak; overall AUM growth is relatively stable; sustainable revenue growth after risk clean-up has not yet been fully verified; upside to the target price based on the disclosed price is limited.

  Comparison

  Credit card NPL formation, asset quality, and ROA were described by management as being in the industry’s top tier; the number of wealth managers and branches is lower than many peers, but fee income is comparable to some larger joint-stock banks.

  Risks

  Net interest margin below expectations, deterioration in retail or corporate asset quality, provision release below expectations, widening capital shortfall, and rising proportion of special-mention mortgage loans.

• Ping An Insurance (Group) Company of China (601318.SS)

  Indirectly related to Ping An Bank’s wealth management business through Ping An Group’s integrated financial ecosystem

  Strengths

  The group ecosystem can provide the bank with customers, products, and integrated financial synergies, supporting wealth management and cross-border allocation capabilities.

  Weaknesses

  The report does not quantify the direct contribution of this synergy to Ping An Insurance’s own earnings or valuation.

  Comparison

  This report does not directly compare Ping An Insurance with other insurance groups.

  Risks

  Insufficient conversion of ecosystem synergies, or weak wealth management demand, may limit the indirect positive impact on related assets.

Key data

• Retail deposit pricing1.56%The previous peak was approximately 2.6%, indicating a significant improvement in funding costs.
• Change in average cost of personal depositsdown 40 bps year-on-year1Q2026 data.
• Total depositsapproximately Rmb1.3tnThe bank continues to reduce long-term high-priced time deposits.
• Proportion of demand depositsapproximately 26% to 27%Previously about 25%, with growth mainly from transaction banking, payroll services, and customer operations.
• Growth in average daily personal demand depositsup 8.1% year-on-year1Q2026 was 9.4% higher than the 2025 average balance.
• Loan scale assumptionapproximately Rmb1.7tnAt around this scale, management expects full-year NPL formation amount and NPL formation ratio to remain broadly stable.
• Number of retail customersapproximately 120mnIncludes about 1.5mn wealth clients and about 100k private banking clients.
• Wealth client thresholdAUM not less than Rmb500kThere are about 1.5mn wealth clients.
• Private banking client thresholdAUM not less than Rmb6mnThere are about 100k private banking clients.
• Wealth management fee incomeRmb1.87bnUp 55% year-on-year in 1Q2026.
• Wealth management revenue contributionapproximately one-third of total revenueAlso accounts for approximately one-third of retail banking revenue.
• Non-interest income contributionapproximately 40% of total revenueRecently, 70% to 80% of fee income growth came from wealth management and private banking clients.
• Wealth management teamapproximately 5,000 wealth managersThe platform provides more than 10,000 products and directly manages about 1.5mn to 2.0mn customers.
• Source of Hong Kong clientsapproximately 95% from existing mainland clientsThe platform mainly meets overseas allocation needs through channels such as QDII and Stock Connect.
• 12-month target priceRmb11.80Based on a 2027E target P/PPOP of 2.125x.

Impact & implications

If funding costs continue to decline and retail NPL formation remains stable, Ping An Bank may achieve earnings improvement in 2H2026 through enhanced NIM resilience, lower credit costs, and provision release. Strong growth in wealth management income can reduce reliance on interest income and strengthen the light-capital revenue structure; its customer base, Ping An Group’s integrated financial ecosystem, digital capabilities, and relatively streamlined branch and wealth manager setup may also bring operating leverage. However, market re-rating still depends on whether wealth management growth can be sustained and translated into clear total revenue improvement, rather than relying solely on the end of the risk disposal cycle.

Risks

• Industry retail credit and wealth management demand remains weak, causing revenue recovery to be slower than expected.
• Net interest margin falls below expectations, offsetting gains from improved funding costs.
• Retail or corporate loan asset quality deteriorates again, and credit cost reduction falls short of expectations.
• The proportion of special-mention mortgage loans still needs to be monitored.
• Provision release is below expectations, limiting the extent of earnings recovery.
• The capital shortfall widens or progress in capital replenishment is slower than expected.
• High growth in wealth management fee income is not sustainable, leaving a lack of new revenue drivers after risk clean-up.
• Cross-border wealth management has limited short-term financial contribution and is affected by changes in market and regulatory environments.

What to watch

• Whether retail NPL formation ratio, NPL ratio, and credit costs continue to improve in 2H2026.
• The proportion of special-mention mortgage loans and changes in asset quality for credit cards, consumer loans, and operating loans.
• Whether retail deposit costs can continue to decline and whether the proportion of demand deposits can rise further.
• Net interest margin performance and the buffering effect of low-cost operating deposits against industry rate-cut pressure.
• Growth rate of wealth management fee income, the proportion of fee-generating AUM, and contribution from non-interest income.
• Whether growth in wealth management and private banking customers can translate into sustainable total revenue growth.
• The origination quality and yield performance of the “New One Loan” platform among supply chain, dealer, new energy, and foreign trade customers.
• The scale and profitability progress of the Hong Kong platform in serving mainland high-net-worth clients through QDII and Stock Connect.
• Whether convertible bond financing is completed and changes in capital adequacy levels.