China Bank Stocks Emerge as Haven as Iran War Jolts MarketsAI Quick ReadChinese bank shares have outpaced the broader market since the war in Iran broke out, with attractive dividend yields and improving earnings prospects likely to provide further tailwinds, according to analysts.
There’s a potential for lenders to exceed expectations in the first quarter, Citigroup Inc. analysts said, noting that banks’ management have already indicated better revenue growth outlook on easing margin pressure and strong fee income growth. The CSI 300 Bank gauge has risen 2.7% since the Middle East conflict began, compared with a 5.7% drop in the broader onshore benchmark.
“We are likely to see margin stabilization in the whole banking sector or some individual banks may even see a rebound in the first quarter,” said Wang Yifeng, chief financial analyst at Everbright Securities Co. “This will continue to attract investors.”
Major Chinese banks are due to release first-quarter results at the end of April.
Read: China’s Mega Banks Post Scant Profit Gains on Margin Squeeze
Margin pressure at China’s biggest state-owned banks eased in 2025 as funding costs fell. Industrial and Commercial Bank of China Ltd. and Agricultural Bank of China Ltd. saw net interest margin narrow by 14 basis points from a year earlier to 1.28%, compared with 19 and 18 basis points declines, respectively, seen in 2024.
A stable and attractive dividend payout may also draw investors seeking defensive names in the uncertain environment. The expected yield on Chinese major bank stocks over the next 12 months is about 5%, compared with 2.8% for the benchmark CSI 300 Index and about 1.8% yield on the 10-year government bond, according to Bloomberg-compiled data.
While concerns over asset quality deterioration linger given China’s economic slump and prolonged property downturn, regulatory support may buoy the sector.
“Given China banks’ relatively stable earnings outlook, China’s greater policy flexibility to mitigate macro shocks and the sector’s systemic importance as state-backed lenders, Chinese bank stocks will see a more resilient price reaction compared with other sectors as geopolitical uncertainty persists,” said Fu Zhifeng, chief investment officer at Shanghai Chengzhou Investment Management.
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