Chinese joint-stock banks diverge: SPDB more positive, Minsheng under pressure

Overview

This report summarizes J.P. Morgan's conclusions after discussions with management from four joint-stock banks during the China summit and financial roadshow. The common themes across the sector are weak loan demand, especially on the retail side; a repair in the NIM trajectory; relatively stable fee income growth; and continued drag from retail asset quality. There is clear divergence at the stock level: SPDB has a more positive earnings-growth and asset-quality-improvement outlook, PAB and Citic are broadly in line with prior expectations, and Minsheng is still in the early stage of confirming deterioration in retail asset quality, with a low provision coverage ratio limiting earnings recovery.

Core views

The core view is 'converging sector trends, diverging stock-specific optionality.' On loan growth, corporate loans are stronger than retail loans, while retail mortgages, credit cards, and consumer finance remain weak. On margins, most banks expect the NIM decline in 2026 to narrow or stabilize. On non-interest income, wealth management, custody, and settlement provide support, but card fees and a high base for investment income are a drag. On asset quality, SPDB and PAB guide for improvements in NPL formation, Citic's credit costs are broadly stable, and Minsheng still struggles to confirm a turning point in retail asset quality. On earnings, SPDB's guidance for high-single-digit FY26 profit growth is the most positive surprise, while Minsheng is expected to be weaker because of provision pressure.

Analysis framework

The report combines management meeting notes with a breakdown of industry fundamentals, comparing SPDB, PAB, Citic, and Minsheng across six main lines: loan demand, NIM, non-interest income, asset quality, provision coverage, and earnings guidance.

Methodology notes

• Fundamental analysisBank earnings driver decomposition

  Loan growth, NIM, non-interest income, and credit costs together determine a bank's earnings sensitivity.

  The report tracks loan demand, margin trends, fee and investment income, NPL formation, and provision coverage ratios to judge the sustainability of 2026 profit growth.

• Peer comparisonHorizontal comparison of joint-stock bank meeting feedback

  Under the same macro environment, different banks diverge because of differences in asset mix, retail risk exposure, and provision buffers.

  SPDB is seen as having a more complete asset-quality clean-up and stronger profit guidance; PAB and Citic are broadly stable; Minsheng faces greater pressure due to retail NPLs and a low provision coverage ratio.

• Risk monitoringRetail asset-quality observation framework

  NPL formation in credit cards, consumer loans, personal operating loans, and mortgages is key to identifying a turning point in retail risk.

  The report emphasizes that retail asset quality remains a drag on the industry, with Minsheng still lacking confidence to confirm a turning point, while PAB and SPDB report improving NPL formation.

Asset mapping & comparison

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

• Shanghai Pudong Development Bank - A (600000.SS)

  The most positive stock in the report, rated OW.

  Strengths

  FY26 profit guidance is high-single-digit growth; 1Q26 NIM improved qoq to 1.44%; management believes the asset-quality clean-up is basically complete and provision coverage is above 200%.

  Weaknesses

  New loan targets are below 2025, implying slower loan growth; mortgage NPL formation may have peaked but remains elevated.

  Comparison

  Compared with PAB, Citic, and Minsheng, SPDB has the strongest earnings acceleration and asset-quality improvement guidance.

  Risks

  A renewed deterioration in retail mortgages and credit cards could reduce room for provision declines and profit improvement.

• Ping An Bank - A (000001.SZ)

  Meeting feedback was neutral; there is a path to profit recovery, but revenue remains under medium-term pressure.

  Strengths

  1Q26 retail loans posted positive growth; NPL formation rate improved significantly; lower credit costs should support profit growth.

  Weaknesses

  Full-year loan growth is only in the low single digits; 2Q-3Q investment income faces a high-base headwind; credit cards remain the main risk point.

  Comparison

  It lacks the clear earnings upside surprise seen at SPDB, but asset-quality improvement is better than Minsheng's.

  Risks

  A decline in investment income, repeated credit card risk flare-ups, and slower-than-expected rebuilding of the retail team and product shelf.

• China Citic Bank - A/H (601998.SS/0998.HK)

  Neutral feedback; targets broadly unchanged.

  Strengths

  Corporate loans are relatively strong, with about RMB230bn of new corporate loans in 1Q26; management is fairly confident about meeting the full-year loan growth target.

  Weaknesses

  Retail loans, credit cards, consumer loans, and personal operating loans still face pressure; targets are maintained rather than raised.

  Comparison

  It has less positive optionality than SPDB, but asset-quality pressure is more manageable than Minsheng's.

  Risks

  Continued pressure in retail credit, a slowdown in corporate loan deployment, and credit costs above expectations.

• China Minsheng Banking - A/H (600016.SS/1988.HK)

  The most negative feedback in the report.

  Strengths

  1Q26 corporate loan demand was better than expected; the pressure from large-scale NPL recognition among real-estate enterprises is expected to ease.

  Weaknesses

  Retail asset quality has not yet confirmed a turning point; credit card NPL formation remains high; provision coverage is about 140%, and needs to be rebuilt to 150% first.

  Comparison

  Compared with SPDB, PAB, and Citic, Minsheng is the weakest in retail asset quality and provision buffers.

  Risks

  Continued retail NPL formation, provision rebuilding weighing on profits, and a delayed ROE rebound.

Key data

• Number of banks covered in the survey4 joint-stock banksIncluding SPDB, PAB, Citic, and Minsheng.
• SPDB 2026 profit guidanceHigh-single-digit growthA clear acceleration from only +1% y/y profit growth in 1Q26.
• SPDB 2026 new loan targetAbout RMB300bnLower than about RMB320bn in 2025, implying loan growth slows from 5.8% to 5.3%.
• SPDB 1Q26 NIM1.44%, +2bps qoqImproved from 1.42% in 4Q25; management targets stability or a slight improvement for the full year.
• Citic 1Q26 new corporate loansAbout RMB230bnPartly from early drawdowns of 4Q25 pipeline projects, with strength concentrated in the Greater Bay Area and the Yangtze River Delta.
• Citic 2026 growth targetsAssets/revenue/profit at 5%/3%/3%Management said these targets would be maintained in 1H, with a possible review in 2H.
• PAB capital and dividendsCET1 9.5%, ROE about 9%, payout ratio 27%Management said there is no external capital need and no near-term plan to raise the payout ratio above 30%.
• PAB provision coverage guidanceExpected to decline by about 20ppts for the full year, with 200% as the floorIt fell by 30ppts in 2025; lower credit costs are one path to profit improvement.
• Minsheng provision coverageAbout 140%, target rebuild to 150%Management said ROE is unlikely to rebound before coverage reaches 150%.
• SPDB rating and priceOW, Rmb8.94Price is the 2026-05-20 closing price.

Impact & implications

The investment implication is that the joint-stock bank sector should not be treated as a simple industry beta trade; more attention should be paid to each bank's asset-quality clean-up progress and provision buffer. SPDB's earnings acceleration, NIM improvement, and completed asset-quality clean-up make it relatively more positively leveraged; PAB and Citic are more about stability without a clear re-rating catalyst; Minsheng still needs to show a clear improvement in retail NPL formation and provision coverage before short-term earnings optionality can improve.

Risks

• Retail loan demand remains weak, and recovery in mortgages, credit cards, consumer loans, and personal operating loans is slower than expected.
• A weak macro environment could further worsen retail asset quality, making it hard for NPL formation rates to decline.
• Lower interest rates or insufficient loan mix adjustment could leave NIM recovery below expectations.
• Intense competition in wealth management, pressure on card fees, or a high base for investment income could cause non-interest income to miss expectations.
• Banks with low provision coverage, such as Minsheng, may need higher impairment charges, weighing on profits and ROE.
• Policy, regulatory, or loan-disbursement pace changes could affect loan growth and earnings realization.

What to watch

• Whether SPDB can deliver FY26 high-single-digit profit growth in subsequent quarters.
• Whether SPDB's NIM stays stable or continues to improve slightly.
• The actual impact of PAB's credit card NPLs and the high base pressure on investment income in 2Q-3Q.
• Whether Citic adjusts its 5/3/3 growth targets in 2H26.
• Whether Minsheng can raise provision coverage from about 140% to 150%, and whether retail asset quality shows a clear turning point.
• Changes in industry retail loan growth, mortgage transaction conversion, and household cash down-payment ratios.