China banks: Sep credit data a slight beat, corporate resilience offsets continued retail weakness

September credit data were slightly better than expected, although underlying trends remained mixed. New TSF of Rmb3.55tn was modestly above JPMe of Rmb3.43tn and Bloomberg consensus of Rmb3.34tn, while new RMB loans of Rmb1.08tn were broadly in line with expectations. Corporate lending remained resilient, with strong medium to long-term loan creation, leading to a better loan mix. Deposit trends stayed resilient with demand deposits ratio broadly flattish despite the weak equities market and a contraction in deposits from non-bank financials. On the negative side, retail credit growth further weakened, and the wider M1-M2 growth gap suggests no clear improvement in underlying economic activity. Against the backdrop of stronger corporate than retail activity, we continue to prefer SOE banks given their stronger corporate franchises; among SOE banks, our sector top pick is CCB.