China Banks: 3Q26 preview: another strong quarter for SOE banks, but PSBC may be a laggard, downgrade to Neutral

We continue to prefer SOE banks into the 3Q26 prints, expecting them to sustain strong earnings momentum with 9%/5% revenue and profit growth y/y, ahead of JSBs' 5%/-2%. SOE revenue growth is driven by 10% y/y NII growth on stable NIM and high-single-digit IEA growth; fee income should be weak on a high base, but investment income should be robust as Big 5 banks book part of the fair value gain from recent IPOs such as CXMT. Despite a 23% YTD rally, H-share SOE banks trade at a 210bps dividend spread (ex-tax) versus 10Y CGB yield, at par with the 10Y mean of 220bps but below the 5Y mean of 320bps;