Credit Demand Consolidating at Bottom Ahead of Recovery

Huatai Research maintains OVERWEIGHT on China's banking sector. In August 2026, new total social financing (TSF) reached RMB1.66tn (vs Wind consensus of RMB1.99tn), down RMB908.3bn YoY, with outstanding TSF growing 7.2% YoY (-0.2pp vs end-July). Government bonds remained the primary pillar supporting TSF, while real-economy credit demand continued building a base and structural divergence in financing persisted, indicating organic real-economy financing appetite will take time to recover. New RMB loans rose only RMB60.0bn, down RMB530.0bn YoY; outstanding loans grew 4.9% YoY. Household loans contracted RMB202.9bn, and corporate loans rose RMB260.0bn, with bill financing up RMB46.9bn YoY. Direct financing reached RMB1.34tn, including RMB1.01tn of net government bond financing and RMB271.2bn of net corporate bond financing;