Key takeaway

BANK OF JIANGSU reported faster revenue growth in 1H26, while net profit attributable to shareholders of the parent company maintained nearly 8% steady growth and ROE remained high. Jiangsu's regional economic advantages and the company's strong customer base continued to support balance sheet expansion, with loans and deposits both continuing to achieve double-digit growth. We expect funding costs to continue improving and the wealth management business trend to strengthen. The core earnings logic of “strong volume and pricing + fee income growth” remains intact. The NPL ratio was unchanged QoQ and remained at its best level since listing, while the provision coverage ratio remained ample. The smooth management transition did not affect the fundamentals' strong performance. The bank offers both growth potential and a high dividend yield, and we maintain our “Buy”rating.

Event

On August 4, BANK OF JIANGSU released its 1H26 preliminary results. In 1H26, operating revenue reached RMB48.952bn, up 9.1% YoY (1Q26: 8.4%); net profit attributable to shareholders of the parent company reached RMB21.876bn, up 8.1% YoY (1Q26: 8.2%); and annualized weighted average ROE was 15.72%, up 0.08 pct YoY. As of 1H26, the company's total assets reached RMB5.61tn, up 17.2% YoY; loans and deposits increased by 14.0% and 17.2% YoY, respectively; and the NPL ratio was 0.81%, unchanged QoQ and down 3 bps from the beginning of the year.

Quick Take

1. Revenue growth accelerated further, profit maintained steady high-single-digit growth, and ROE improved YoY. In 1H26, BANK OF JIANGSU recorded operating revenue of RMB48.952bn, up 9.1% YoY and accelerating further from 8.4% in 1Q26. On a quarterly basis, operating revenue reached RMB24.772bn in 2Q26, up 9.8% YoY, with growth continuing to accelerate from 1Q26. In terms of profit, net profit attributable to shareholders of the parent company reached RMB21.876bn in 1H26, up 8.1% YoY. On a quarte rly basis, net profit attributable to shareholders of the parent company reached RMB11.294bn in 2Q26, up 8.0% YoY, maintaining steady high-single-digit growth. Annualized weighted average ROE rose by 0.08 pct YoY to 15.72%, with profitability remaining strong relative to peers. In terms of net interest income, Jiangsu has a significant regional economic beta advantage, and the company has a solid corporate banking franchise. Credit issuance maintained rapid growth, and strong balance sheet expansion can continue to offset downward pressure on asset yields. Meanwhile, high-cost deposits continue to mature and reprice, leaving considerable room for further improvement in funding costs. We expect net interest income to maintain solid growth. For non-interest income, increased capital market activity and steady AUM growth are expected to continue driving improvement in wealth management income. Meanwhile, the company continues to expand its corporate settlement customer base, and revenue from integrated services such as settlement and clearing, guarantees and commitments is expected to maintain solid performance. As for other non-interest income, the base effect in 2025 is limited, and overall performance is expected to remain stable. Previously, the company relie d on scale expansion, fee income growth and provision releases to support profit, while narrowing net interest margin was the main drag. As pressure on net interest margin eases at the margin, the foundation for earnings growth remains solid.

Looking ahead to the full year, strong financing demand in Jiangsu is expected to continue supporting the company’s rapid balance sheet expansion. Meanwhile, ongoing optimization of funding costs will provide support for net interest margin, and net interest income is expected to maintain solid growth. For non-interest income, sustained capital market activity is expected to improve wealth management income. Meanwhile, integrated corporate businesses such as settlement and clearing are expected to maintain rapid growth, and other non-interest income faces no significant high-base pressure. With asset quality remaining stable and improving, BANK OF JIANGSU is expected to maintain steady high-single-digit growth in both revenue and profit for the full year. Its fundamentals are expected to remain firmly in the top tier among listed banks.

2. Jiangsu’s strong regional beta advantage persists, with both deposits and loans maintaining double-digit growth. In 1H26, BANK OF JIANGSU reported total assets of RMB5,610bn, up 17.2% YoY. Its outstanding loans reached RMB2,770bn, up 14.0% YoY. Its outstanding deposits reached RMB2,980bn, up 17.2% YoY. On a quarterly basis, loans and deposits grew by 3.0% and 1.2% QoQ, respectively, in 2Q26, maintaining steady expansion. On the asset side, as the largest provincially controlled incorporated bank in Jiangsu, the company has deeply cultivated the local market and built a solid foundation in traditional corporate banking. It has also continued to develop distinctive strengths in areas such as manufacturing finance, micro and small business finance, and green finance. Jiangsu’s strong industrial base and robust financing demand from the real economy can provide strong support for the company’s credit extension. The company’s manufacturing, gre en and inclusive micro and small business loans are all expected to maintain rapid growth, with corporate loans contributing the bulk of incremental lending. On the liability side, deposit growth continued to outpace loan growth. Expansion of the corporate settlement customer base and continued strengthening of the retail customer base jointly drove deposit growth, providing ample and stable funding for the company’s subsequent asset deployment.

3. Liability costs continue to improve, and the decline in net interest margin is expected to narrow further. On the asset side, the LPR remained unchanged in 1H26, easing policy-driven repricing pressure compared with expectations at the beginning of the year. Following the relatively substantial decline in lending rates in the previous period, there is limited room for a further sharp drop in new loan pricing. However, competition among banks for high-quality corporate projects remains intense, and asset yields still face certain downward pressure. On the liability side, the benefits of multiple cuts to posted deposit rates continue to materialize, while existing high-cost time deposits are gradually maturing and being renewed. Meanwhile, the company continues to expand its corporate settlement customer base and increase the retention of low-cost settlement funds. Deposit costs still have room for further improvement and are expected to provide meaningful support for net interest margin. Looking ahead to the full year, as asset-side pricing pressure eases compared with 2025 and liability costs continue to improve, BANK OF JIANGSU's decline in net interest margin is expected to narrow further, continuing to support the realization of strong growth in both volume and pricing.

4. Asset quality remains sound, with the non-performing loan ratio at its best level since listing. BANK OF JIANGSU's non-performing loan ratio stood at 0.81% in 1H26, flat QoQ and down 3 bps from the beginning of the year, marking its best level since listing. The provision coverage ratio was 304.83%, down 3.5 pcts QoQ but remaining above 300%, indicating ample risk coverage capacity. In key areas, the company continues to resolve risks associated with existing real estate exposures. Its corporate real estate risk exposure is limited and is expected to decline further. The asset quality of retail operating loans and consumer loans may remain affected by the weak macroeconomic recovery. However, given the company's solid overall asset quality and ample provision buffer, asset quality is expected to remain stable with an improving trend throughout the year.

5. Investment recommendation and earnings forecast: BANK OF JIANGSU's revenue growth accelerated further in 1H26, net profit attributable to shareholders of the parent company maintained steady growth of nearly 8%, and ROE improved YoY. As the largest locally incorporated bank in Jiangsu Province, the company fully benefits from the strong beta of Jiangsu's regional economy. Deposits and loans maintain rapid growth, while robust balance sheet expansion effectively offsets downward pressure on net interest margin. With liability costs continuing to improve, the decline in net interest margin is expected to narrow further for the full year. An active capital market and steady AUM growth are driving an improving trend in wealth management income. Together with contributions from integrated corporate services such as settlement and clearing, fee and commission income is expected to maintain solid performance. Asset quality improved further, with the nonperforming loan ratio falling to its lowest level since listing. Overall, the earnings growth drivers of strong loan growth and pricing, higher fee and commission income, and stable-to-improving asset quality continue to materialize. These factors are expected to support solid high-single-digit growth in BANK OF JIANGSU's revenue and profit for the full year. Revenue growth is projected at 8.8% for 2026, 8.9% for 2027, and 9.0% for 2028, while profit growth is expected to be 8.5%, 8.6%, and 9.1% respectively. BANK OF JIANGSU's current share price implies 0.75x 2026E P/B, while its 2026E dividend yield is 5.3%, among the highest in the industry. The bank has strong fundamentals, offering both growth potential and a high dividend yield. It is well positioned for both upside and downside scenarios. We maintain our “Buy” rating.

6. Risks: (1) If the macro-economic recovery is slower than expected, the solvency of enterprises will be weakened, and some lower-rated enterprises may default, which will lead to the non-performing exposure risk in banks and the asset quality may decline significantly. (2) If debt risks associated with real state and local financing platforms become exposed on a large scale, it would pose a significant impact on bank asset quality and drastically weaken banking profitability. (3) If the expansionary credit policy doesn't meet expectations, the rapid economic growth of the company's operational regions may prove unsustainable, thereby adversely impacting the company's credit extension significantly. (4) The retail business transformation may fail to meet expectation; high volatility in the equity market may impact on the company's wealth management business.