Banks China Weekly Wrap Soft CPI, weak loan demand and incremental policy support

Banks - China Weekly Wrap: Soft CPI, weak loan demand and incremental policy support Industry Overview

Sector performance 14 August 2026 H-share bank sector was down 0.2% (vs HSI -2.1%). CNCB (+0.8%) outperformed, while CEB (-3.1%) underperformed. Sector P/B: 0.53x, P/E: 5.8x, dividend yield: 5.4%. A- Equity share bank sector increased 0.5% (vs CSI300 -0.6%), with SHRB (+4.3%) leading and China Banks-Multinational MSB (-3.1%) lagging. Sector P/B: 0.64x, P/E: 6.9x, dividend yield: 4.5%. Southbound investors net bought CCB, net sold MSB most among China banks. Table of Contents Weekly Market Review Performance and valuation 2 Macro: July CPI slowed to 0.5% YoY from 1.0% in June, while PPI narrowed to 3.5% from A-H share premium 4 4.1%, both below expectations. RMB loans contracted in July, but TSF rose RMB1,406bn, Stock Connect Holdings 4 pointing to bond-led financing and still-weak loan demand. Fiscal pressure persisted Relative valuation 5 amid slower local-government bond issuance, while audits highlighted weak SOE Interest rates and NCDs 8 outbound-investment controls. Separately, China announced five countermeasures Convertible bond tracker 8 against US technology restrictions, and Li Yunze was removed from the NPC. Monetary: Ping An’s holding in H-share banks 9 PBOC calls for timely, pragmatic incremental policy support and stronger countercyclical China CITIC Financial AMC’s holding in H-share adjustments; shifts focus from bank lending to aggregate loan and bond financing. 10 banks Corporate and mortgage rates stayed at c.3% in 2Q26, microloan companies capped Ex dividend schedule 10 new-loan rates at 12%, and DR-based loans expanded to over 15 provinces. The RMB reached a 42-month high against the USD, while the PBOC added nearly 20 tonnes of Bank 1H26 reporting/briefing schedule 11

gold in July, marking the 21st consecutive month of purchases. Liquidity: The PBOC Bank abbreviations 11

conducted a RMB1tn six-month outright reverse repo on August 14 despite zero short- term operations. Non-bank buying pushed the 10-year CGB yield below 1.7%; banks sold Wenqing Han, CFA >> bonds and rotated into NCDs, while bank acceptance bill discount rate stayed at 0.5%. Research Analyst Capital market: Insurers stepped up research into communications, AI, pharmaceuticals, Merrill Lynch (Hong Kong) hard technology and Unitree, while six bank WMS subsidiaries received over RMB21mn of Unitree allocations, with potential gains of nearly RMB60mn. Bank Tier 2 and Winnie Wu >> Research Analyst perpetual bond issuance rose 22.31% YoY YTD, while preferred shares outstanding fell Merrill Lynch (Hong Kong) below RMB500bn. Other developments included MSCI China’s reshuffle, which removed Vanke, and a Futu-Tiger probe involving 45 people and alleged gains of USD155mn. Emma Xu >> Financials: A private bank’s 1H profit fell 60% YoY. NPL disposals accelerated. Rural- Research Analyst bank consolidation continued, with 560 lenders deregistered in over two years while Merrill Lynch (Hong Kong) Qianxinan Rural Commercial Bank and 174 branches received approval; Sichuan banks’ joint WMS plan stalled with RMB1tn of proprietary WMPs awaiting regulatory clarity, and banks consolidated branches and apps. Property: China launched a RMB15tn five- year urban-renewal programme covering 115,000 ageing communities and c.500,000 dilapidated homes, while cities increased smaller land supply. Beijing cut non-local PBOC: People's Bank of China buyers’ social-security requirement within the Fifth Ring Road to one year and raised the FX: Foreign Exchange maximum provident-fund loan to RMB3.4mn; 7M26 judicial-auction transactions rose DR: Deposit Repo Rate over 40% while prices fell 9% YoY. Company news: BOHZ’s Zhang Jingke was approved PMI: Purchasing Managers' Index as Director and Vice Chairman, CEB Executive Director and Vice President Yang Bingbing ETF: Exchange-Traded Fund stepped down, and an ICBC head-office executive reportedly went missing amid CSRC: China Securities Regulatory investigations. SHRB to unlock 57.86mn restricted shares on Aug 19. Commission NPL: Non-Performing Loan CD: Certificate of Deposit AMC: Asset Management Company >> Employed by a…