China Banks: Thoughts post recent rally

After a period of restriction on both ICBC and ABC, we moved ICBC and ABC to OW from Not Rated. In general, we expect SOE banks to report robust revenue growth and resilient profit growth in the coming 2-3 quarters, and to continue outperforming the JSBs cohort and the index by year-end amid ongoing fund-flow support in risk-off trade. For 3Q26 we expect SOE banks to deliver 9% y/y revenue growth and 5% y/y profit growth, ahead of JSBs at 5%/-2%; ABC is estimated at 12% revenue and 7% profit growth, the highest among SOE peers, while PSBC faces headwinds from weak revenue (6% y/y) and a low 3Q25 impairment base. Our pecking order is ICBC > CCB > BOC > ABC > BoCom > PSBC, with ICBC-H the top pick after underperforming H-share SOE banks by 8ppt in the past three months;