JPM-Top Picks-20250822

2H25 Outlook: Yield compression rally to regain momentum

Since July 2025, MSCI China banks and CSI 300 banks have underperformed MSCI China and CSI 300 by11ppt and 10ppt, respectively. Nonetheless, we remain positive on the China banks sector. Despite a morechallenging macro environment in 2H, we expect banks’ revenues and profit growth to improve sequentially,due largely to stabilization in NIM and a moderate recovery in fee income, driven by wealth business. Webelieve that ample liquidity and a weak macro backdrop will continue to favour asset allocation into yieldstocks. In addition, there is on average teens percentage potential upside on banks’ share prices based on25e dividend spread compression (Table 2-Table 4). Given households may shift asset allocation fromdeposit to equities, we prefer banks with strong deposit franchises. Our top pick among the A share banks isCMB-A, due to its decent dividend yield and higher earnings sensitivity to capital markets. Among the H-share banks, our top picks are BOC-H and ICBC-H on relatively high dividend yield vs peers, and as BOC-Hhas been a laggard on share performance vs its SOE peers YTD.