UBS: Agricultural Bank of China A (601288) 1Q26 Revenue, PPOP & NPAT Broad-Based Beat; CET1 Ratio Further Declines
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A UBS report details a broad-based earnings beat for Agricultural Bank of China (601288) in the first quarter of 2026. Revenue grew 5.2% year-over-year, driven by a 3.8% increase in net interest income and an 8.5% rise in fee income. Pre-provision operating profit (PPOP) surged 6.1%, outpacing revenue growth and highlighting effective cost management. Net profit exceeded UBS estimates by 2.3 percentage points, climbing 4.8% year-over-year.
Despite these robust earnings, the Common Equity Tier 1 (CET1) capital ratio declined by 15 basis points from the prior quarter to 10.82%, primarily due to rapid risk-weighted asset expansion. Asset quality metrics remained stable, with the non-performing loan ratio holding steady at 1.25% and the provision coverage ratio improving to 310%.
The net interest margin compressed by 2 basis points sequentially to 1.95%, though this decline was milder than peer averages. Total loans increased by 11.2% year-over-year. Management intends to address capital constraints through internal capital accumulation and preferred stock issuances.
UBS maintains a Buy rating on the bank with a target price of RMB 4.50, citing the comprehensive earnings beat, resilient asset quality, and a highly attractive 2026 estimated dividend yield of approximately 6.5%.