Bank of Communications Post-Earnings: Deposit Rollover Tops 90% as Margins Rebound

Bank of Communications reported a 4.04% rise in first-half 2026 net profit to 47.87 billion yuan, alongside an unexpected 2-basis-point rebound in its net interest margin to 1.23%. Despite benchmark deposit rate cuts, the lender saw over 90% of maturing fixed deposits rolled over, signaling persistent depositor risk aversion. The repricing of maturing high-cost term deposits lowered liability expenses, offering a buffer against broader banking-sector margin compression.

As commercial banks face narrowing net interest margins, Bank of Communications' interim performance provides evidence that liability repricing from legacy high-yield fixed deposits can stabilize bank profitability. The sustained rollover rate of over 90% also highlights household preference for capital preservation over riskier investments amid macroeconomic shifts.

Bank of Communications, one of China's largest state-owned commercial lenders, posted a 4.04% year-on-year increase in net profit for the first half of 2026, supported by an expansion in net interest income as legacy deposit costs dropped, according to company earnings filings and remarks from an interim results briefing in Shanghai. For the six months ended June 30, the bank generated net profit attributable to shareholders of 47.87 billion yuan ($6.7 billion) on operating revenue of 142.34 billion yuan, up 6.73% year-on-year. Total assets expanded 4.58% from the end of 2025 to reach 16.26 trillion yuan, while total customer deposits climbed 6.53% to 9.92 trillion yuan. A key driver behind the earnings improvement was a rebound in the bank's net interest margin, which rose 2 basis points from a year earlier to 1.23%, according to People's Daily. Net interest income reached 92.59 billion yuan, advancing 8.62% year-on-year. Bank executives attributed the margin recovery to the repricing of maturing high-yield term deposits. Vice President Zhou Wanfu stated at the briefing that more than 90% of the bank's maturing fixed deposits were rolled over by clients, despite deposit rates falling to historical lows. Zhou noted that fixed-deposit customers remain conservative, continuing to view bank deposits as the safest repository for their funds. Securities research estimates indicate that between 32 trillion and 71 trillion yuan of high-rate fixed deposits across China's banking sector are maturing in 2026, according to Jiemian News. These deposits, largely locked in during 2021 and 2023 at rates between 3% and 4%, are now repricing near 1.7% following consecutive rate cuts, significantly relieving commercial lenders' funding expenses. Asset quality remained stable, with the bank's non-performing loan ratio standing at 1.30% at the end of June, while its provision coverage ratio was 203.80% and its core Tier-1 capital adequacy ratio reached 11.25%. The lender announced an interim dividend of 14.85 billion yuan, representing a payout ratio of 31% of attributable net profit. Bank President Zhang Baojiang highlighted the launch of the bank's updated strategy for the 15th Five-Year Plan period, emphasizing plans to leverage Shanghai's pilot financial policies to expand cross-border financial services and support Chinese enterprises expanding overseas.