Ping An Bank modestly beat expectations in 1Q26, with strong non-interest income and quarter-over-quarter NIM improvement

Overview

This report is Goldman Sachs' review of Ping An Bank's 1Q26 results. The company's 1Q26 pre-provision operating profit and net profit both modestly beat expectations, mainly supported by quarter-over-quarter NIM improvement driven by lower funding costs, strong growth in non-interest income, and significantly better asset quality indicators. Goldman Sachs maintains its Neutral rating and sets a 12-month target price of Rmb11.89.

Core views

Goldman Sachs believes this quarter's results were slightly better than expected, but investors will focus more on three main themes going forward: first, whether the quarter-over-quarter NIM improvement is sustainable; second, whether the return to positive growth in retail loans and strong agency sales fees imply an improved outlook for consumer finance in 2026; third, the reasons for the sharp decline in the NPL formation rate, as well as the room for asset quality improvement and provision release in 2026.

Analysis framework

The report breaks down 1Q26 results from the perspectives of earnings drivers, loan structure, non-interest income, real estate exposure, provisions, and capital adequacy, and updates Goldman Sachs' 2026E-2028E earnings forecasts, valuation multiples, dividend yield, and target price based on its forecasting model. Valuation uses a 2027E target P/PPOP multiple of 2.125x, corresponding to a 12-month target price of Rmb11.89.

Methodology notes

• Valuation methodologyTarget P/PPOP multiple

  Target P/PPOP valuation based on 2027E pre-provision operating profit

  Goldman Sachs applies a 2027E target P/PPOP multiple of 2.125x to Ping An Bank, deriving a 12-month target price of Rmb11.89.

• Style factorGS Factor Profile

  Growth, financial returns, valuation multiples, and composite factor percentiles

  Goldman Sachs' factor framework compares stocks relative to the market and industry peers; for financial stocks it focuses on metrics such as EPS/revenue growth, ROE, and P/E, P/B, and P/D.

• M&A frameworkM&A Rank

  M&A likelihood score

  Ping An Bank has an M&A Rank of 3, indicating a low probability of being acquired, and this is not included in the target price.

Asset mapping & comparison

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

• Ping An Bank Co. (000001.SZ)

  Report coverage target, Neutral rating maintained

  Strengths

  1Q26 earnings slightly beat expectations, strong non-interest income growth, quarter-over-quarter NIM improvement, and a significant decline in the NPL formation rate.

  Weaknesses

  NIM is still down year over year, non-mortgage retail loans are still negative year over year, and the ROE forecast declines from 8.2% in 2025 to 7.7% in 2026E.

  Comparison

  Relative to the Shanghai-Shenzhen 300, the stock's relative return over the past 12 months was -20.9%; the valuation table shows 2026E P/B of about 0.4x and dividend yield of 5.6%.

  Risks

  Upside risks include better-than-expected NIM, improved retail asset quality, higher-than-expected provision release, and an announcement of convertible bond financing; downside risks include lower-than-expected NIM, deterioration in retail and corporate assets, lower provision release, and a widening capital shortfall.

• Shanghai-Shenzhen 300

  Benchmark for share price performance comparison

  Strengths

  Used to measure Ping An Bank's relative market performance.

  Weaknesses

  The report does not provide an investment rating or fundamental view on the index itself.

  Comparison

  Ping An Bank's relative performance versus the Shanghai-Shenzhen 300 over the past 3 months, 6 months, and 12 months was -1.3%, -7.0%, and -20.9%, respectively.

  Risks

  Overall market volatility will affect relative returns and valuation performance.

Key data

• 1Q26 PPOP/NPATRmb25.4bn/Rmb14.5bnUp 4%/3% year over year, 5%/4% above Goldman Sachs' forecast.
• Net interest incomeRmb22bnDown 3% year over year, up 3% quarter over quarter, and 3% above Goldman Sachs' forecast.
• Goldman Sachs-calculated NIM1.51%Down 10bps year over year, improved 2bps quarter over quarter, and 5bps above Goldman Sachs' forecast.
• Loan growthUp 2% year over yearCorporate loans rose 9.4% year over year, retail loans rose 0.3% year over year, of which mortgage loans rose 6% year over year.
• Non-interest incomeRmb13bnUp 21% year over year, 9% above Goldman Sachs' forecast.
• Fee income/investment incomeRmb7bn/Rmb6bnFee income rose 12% year over year; investment income rose 54% year over year.
• NPL formation rate0.7%Down 134bps/109bps year over year/quarter over quarter, respectively.
• NPL coverage ratioaround 220%Remained broadly stable despite a 7% year-over-year increase in provisions.
• Real estate exposureRmb316bnExcluding mortgages, down 7%/2% year over year/quarter over quarter in 1Q26; real estate loans were Rmb206bn, down 13%/2% year over year/quarter over quarter.
• CET1 ratio9.5%1Q26 was 3bps below Goldman Sachs' forecast; the report table shows 9.6% for 2026E.
• 2026E net profit forecastRmb43.8bnRaised from the previous forecast; 2026E-2028E PPOP/net profit forecasts were raised by about 2% on average.

Impact & implications

The implication of this report is that Ping An Bank's short-term earnings quality has improved at the margin, but stock re-rating still depends on the sustainability of improvements in NIM, retail business, and asset quality. The strong performance of non-interest income and the decline in the NPL formation rate help ease market concerns about earnings and asset quality; however, the Neutral rating and only 8.1% target upside show that Goldman Sachs remains restrained on further valuation expansion.

Risks

• NIM improvement may not be sustainable or may come in below expectations.
• Asset quality of retail and corporate loans may deteriorate.
• Provision release may be lower than expected, affecting earnings flexibility.
• Capital shortfall may widen.
• Investment income within non-interest income may be affected by the bond market environment and a low base, and its sustainability needs to be verified.

What to watch

• Whether quarter-over-quarter NIM improvement continues, and the room for further funding cost declines.
• The growth trend of consumer finance and retail loans in 2026, especially whether non-mortgage retail loans can improve.
• Whether fee income driven by agency sales is sustainable.
• The true drivers behind the sharp decline in the NPL formation rate, as well as trends in asset quality and provision coverage ratio.
• Changes in real estate exposure, NPL ratio for real estate loans, and mortgage NPL ratio.
• CET1 capital adequacy ratio and progress on potential convertible bond financing.