China Banks: Initial Review: Big Six Banks: Strong 2Q26 Earnings, Higher Dividends, Rising Divergence

Goldman Sachs' initial review of China's big six state-owned banks finds 1H26 results broadly above expectations: average pre-provision profit rose 13% yoy (7pp above GS estimates) and net profit 6% (3pp above). Revenue grew 10% (3pp beat), comprising net interest income +10% (in line), non-interest income +10% (12pp beat) and investment income +45% (61pp beat), offsetting a 6% fee decline (11pp miss). Operating expenses rose only 3%, keeping the cost-income ratio stable at 25.1%, while provisions increased 19%, reflecting continued caution on asset quality. All six banks raised interim dividends by 7-9% yoy, lifting payout ratios by about 1pp to roughly 31%; average interim dividends of Rmb37bn (+8% yoy) imply 2026E average dividend yields of 4.3% for A-shares and 4.9% for H-shares. Goldman expects differentiation to hinge increasingly on non-interest income sustainability—especially investment income—capital strength, shareholder returns, and retail asset quality. CCB (Buy, HK$10.10) and BOC (Buy, HK$5.96) remain top picks; PSBC is Buy (HK$5.76), ICBC (HK$6.92) and ABC (HK$5.81) are Neutral, and BoCom is Sell (HK$6.39); H-share prices as of August 28. BOC's investment income beat GS by 63%, ABC posted the strongest loan growth (+8%), and PSBC remains the asset-quality watch item.