REUTERS, Beijing

China’s leading state-owned banks are expected to recover this year from record-low profit margins as the repricing of ​nearly $8 trillion worth of maturing high-priced time deposits eases pressure on their funding costs.

The top-five state banks, some of the biggest in the ‌world, are expected by analysts to post a drop in profits or lower income growth for 2025 when they release annual results this week as they reeled from a deepening property sector debt crisis and a slowing economy.

While the war in Iran could stoke cost-push inflation and pile pressure on corporates, jobs and wages in the world’s second-largest economy that is already battling deflation, analysts see ​mitigating factors for lenders this year.

Chief among them is the repricing of high-cost time deposits as the tightly controlled deposit rates have been steadily lowered ​by the regulator over the past four years with a view to protecting the profit margins of the lenders. That is expected to boost their profits.

“Deposit repricing will be the main driver behind banks’ earnings performance bouncing back in 2026 and should help stabilise their net interest margins,” ​said Zhang Yiwei, an analyst at China Galaxy Securities.

Zhang estimated around 54 trillion yuan ($7.8 trillion) in time deposits at listed banks will mature in 2026, and rolling over of ​maturing three-year deposits at current rates will lower costs by roughly 135 basis points compared to 2023 levels.

That is estimated to add about 12 basis points overall to banks’ net interest margins (NIMs), a key gauge of profitability, said Zhang.

Industrial and Commercial Bank of China is estimated to post a 2 percent decline in 2025 profit, while China Construction Bank is expected to report a 0.4 percent decline, according ​to LSEG data.

Agricultural Bank of China is forecast to report a 2.3 percent net profit growth, though slower than last year. Bank of China (BOC) and Bank of Communications (BoCom) ​are expected to post growth below 1 percent, the data showed.

For 2026, three of the five lenders are expected to report a 2.3 percent to 3.3 percent year-on-year growth in net profit, with BoC at ‌0.9 percent and BoCom at 1.5 percent according to the data.

The repricing of maturing time deposits, which Huatai Securities estimates at a record 50 trillion yuan in 2026, comes at a critical time for banks. China has cut benchmark lending rates repeatedly over the past few years amid weak credit demand, squeezing NIMs to record lows and forcing lenders to seek alternative revenue sources.

“We expect margin pressure to alleviate for Chinese banks and stabilise in 2027, driven primarily by deposit repricing,” said Ming Tan, Director, S&P Global Ratings.