Bank of Jiangsu 1Q26 post-results note: funding costs falling, loan growth solid, asset quality continuing to improve

Overview

This report is Goldman Sachs' 1Q26 post-results NDR note on Bank of Jiangsu (600919.SH), focusing on management's comments on NIM, deposit costs, loan growth, loan yields, asset quality, provisions, investment income, fee income, and capital. The report does not provide an investment rating or target price and explicitly marks Bank of Jiangsu as not covered.

Core views

The core view is that 1Q26 NIM edged down because deposits grew rapidly on the liability side and interbank funding increased, but management expects NIM to stabilize as asset-yield compression eases and funding costs keep declining. On deposits, high-yield time deposits were repriced heavily in 1Q, pushing deposit rates down by 20bps; this may still bring low-single-digit deposit cost declines ahead. On loans, 2026 deployment is expected to rise YoY, with around Rmb 200bn deployed in 1Q, mainly from corporate loans; retail loan targets are more aligned with market conditions. On asset quality, the NPL ratio and NPL formation rate both declined YoY, mortgage NPLs remained below 0.5% even during the period of concentrated industry risk exposure, and newly originated mortgage risk continued to improve. After fee income grew 20% in 2025, there is still a fairly strong growth outlook for 2026.

Analysis framework

The report mainly relies on management discussions in the post-results NDR and breaks down each business line qualitatively and partially quantitatively: it explains NIM changes through funding structure and repricing of high-cost deposits, assesses loan deployment pace through regional credit demand and loan mix, evaluates asset quality and risk buffers using the NPL ratio, overdue ratio, coverage ratio, and loan-loss reserve ratio, and judges non-interest income growth through fee-business scale and fee-rate trends.

Methodology notes

• Management discussion1Q26 post-results NDR note

  Deriving operating trends from management Q&A and post-meeting feedback

  The note centers on NIM, deposits, loans, asset quality, investment income, fee income, and capital, and mainly reflects management's judgment on operating trends in subsequent quarters.

• Bank fundamentals analysisNIM and funding-cost analysis

  Asset yields, deposit costs, and interbank funding together determine the NIM trend

  The report attributes the 1Q26 NIM decline to strong deposit growth and higher interbank funding, while expecting repricing of high-cost time deposits and lower funding costs to relieve pressure.

• Risk analysisAsset quality and provisioning analysis

  NPL ratio, NPL formation rate, overdue ratio, coverage ratio, and loan-loss reserve ratio are used to measure bank risk

  The report notes that Bank of Jiangsu's NPL ratio and NPL formation rate declined YoY in 2025 and 1Q26, and the loan-loss reserve ratio is expected to stay above 2.5%.

Asset mapping & comparison

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

• Bank of Jiangsu 600919.SH

  The report's subject, not covered

  Strengths

  Strong regional credit demand; steady corporate loan deployment; lower funding costs driven by repricing of high-yield time deposits; improving asset-quality metrics; rapid fee-income growth; ample internal capital accumulation.

  Weaknesses

  1Q26 NIM still declined slightly; fee income contribution to total revenue remains relatively low; future loan growth may slow as the project pipeline moves into the reserve stage.

  Comparison

  The report says fee income is likely to maintain strong growth in 2026 and outperform the market; retail loan pricing is supported by anti-involution, with consumer and mortgage rates both remaining above 3%.

  Risks

  Further asset-yield compression, a smaller-than-expected decline in deposit costs, slowing credit demand, renewed weakness in retail assets, and market volatility in bond investments affecting investment income.

Key data

• 1Q26 new depositsaround Rmb 400bnHigher than around Rmb 300bn in 1Q25 and basically sufficient to meet asset-allocation needs.
• Deposit growth in 2022-2025Rmb 120bn / 150bn / 130bn / 150bnHigher-yield time deposits booked in 2023 will face a large maturity and repricing volume in 2026.
• 1Q26 change in deposit ratesdown 20bpsDriven by concentrated repricing of high-yield time deposits in 1Q.
• 1Q26 new loansaround Rmb 200bnMainly driven by corporate loans, with a relatively fast deployment pace in 1Q.
• Change in new-loan yields10-20bps lower than 1Q25Concentrated deployment suggests loan yields are generally stabilizing.
• Consumer loan and mortgage ratesboth remained above 3%The report says retail loan pricing is supported by anti-involution policies, and this level is expected to be sustainable.
• Mortgage NPL ratiobelow 0.5%It remained at a low level even during the period of concentrated industry risk exposure.
• New mortgage overdue ratiodown from 1.7% to 0.4%Risk levels have basically returned to pre-2022 levels.
• Loan-loss reserve ratioabove 2.5%Management expects this level to be maintained.
• Share of FVTPL bonds in financial investmentsaround 10%Since 3Q24, newly added bonds have mainly been allocated to FVTOCI to reduce the impact on the P&L.
• 2025 fee income growthup 20% YoYContribution remains relatively low, leaving room for further improvement.
• 2025 custody assetsabove Rmb 5tnCustody services are one of the drivers of fee income.

Impact & implications

If management's view proves correct, Bank of Jiangsu's 2026 earnings resilience is likely to come from three main sources: first, lower funding costs from repricing of maturing high-yield time deposits; second, corporate loan demand from manufacturing, infrastructure, and major projects in Jiangsu; and third, fee-income growth from wealth management, distribution, and custody businesses. Improving asset quality and a loan-loss reserve ratio above 2.5% should help ease concerns about credit costs. That said, whether NIM truly stabilizes still depends on the pace of asset-yield decline, deposit competition intensity, and the subsequent loan-deployment cadence.

Risks

• NIM stabilization depends on slower asset-yield compression and continued funding-cost declines; if either condition fails, earnings pressure may persist.
• 1Q26 loan deployment was relatively fast, so changes in the loan-loss reserve ratio still need to be monitored as deployment momentum slows.
• Although corporate loan demand is strong, it may gradually shift toward project reserves in the second half, creating a risk of slower loan growth.
• In retail banking, credit cards, internet lending, and operating loans are still being adjusted and contracted, limiting their contribution to growth.
• Bond investments are intended to hedge and stabilize returns, but market-rate volatility may still affect investment-income performance.

What to watch

• Whether NIM stabilizes in subsequent quarters as management expects.
• The maturity and repricing scale of high-yield time deposits and the magnitude of deposit-cost declines.
• The sustainability of loan demand related to manufacturing, infrastructure, and major 15th Five-Year Plan projects in Jiangsu.
• Changes in the NPL ratio, NPL formation rate, mortgage overdue ratio, and coverage ratio.
• Scale growth in wealth management, fund distribution, wealth products, gold, and custody businesses within fee income.
• Whether there is still no external capital-raising plan and how much support internal capital provides for business expansion.