OCBC Investment Research
Date of Report: 2 September 2025
Agricultural Bank of China Leads Peers in Profit Growth: In-Depth Analysis of Performance, Valuation, and Outlook for 2025

Executive Summary: Agricultural Bank of China Delivers Resilient Growth Amid Sector Headwinds

Agricultural Bank of China (ABC), one of China’s Big-4 state-owned banks, has reported a notable outperformance in profit growth for the first half of 2025. Despite sector-wide headwinds such as net interest margin (NIM) compression, ABC demonstrated resilience through double-digit growth in non-interest income, ongoing improvements in asset quality, and robust capital adequacy. This comprehensive analysis covers ABC’s latest financial performance, peer comparison, valuation, ESG standing, and strategic outlook.

Financial Highlights: 1H25 Results Outshine Major Peers

• 1H25 Profit After Tax and Minority Interest (PATMI): Up 2.7% year-on-year (YoY) to CNY 139.5 billion.
• Interim Dividend: CNY 1.195 per 10 shares declared, representing a 30% payout ratio.
• Net Interest Income (NII): Declined 2.9% YoY to CNY 282.5 billion; NII now 76.4% of total operating income.
• Net Interest Margin (NIM): Fell 13bps YoY to 1.32% due to lower yields on interest-earning assets.
• Non-Interest Income: Rose 14.5% YoY to CNY 87.3 billion, with net fee and commission income up 10.1% to CNY 51.4 billion.
• Pre-Provision Operating Profit (PPoP): Slightly down by 0.2% to CNY 258.1 billion.
• Credit Impairment Losses: Down 3.0% YoY to CNY 98.0 billion.

Credit and Profitability Ratios: Mixed Signals in Capital Strength

CET1 Capital Adequacy Ratio (CAR): Down 31bps half-on-half to 11.1%.
Total CAR: Decreased by 74bps to 17.5%.
Non-Performing Loan (NPL) Ratio: Improved by 2bps to 1.28% as of June 2025.
Allowance to NPL: Deteriorated by 4.6ppt to 295.0%.
Return on Average Total Assets: Down 5bps YoY to 0.62%.
Return on Weighted Average Net Assets: Down 59bps YoY to 10.2%.

Valuation and Peer Comparison: How ABC Stacks Up

Agricultural Bank of China stands out among its Big-4 state-owned peers for its robust liquidity and lower risk exposure. The table below summarizes key valuation and profitability metrics for the leading Chinese banks for FY25E and FY26E.

Investment Thesis: Quality Core Holdings with Rural Focus

• ABC maintains one of the lowest exposures to risk assets among the Big-4 state-owned banks.
• It boasts a strong liquidity position and a deep deposit franchise, making it a preferred core holding for investors seeking stability in Chinese banking.
• ABC stands out for its emphasis on rural development and integrated urban-rural financial services, in line with China’s strategic priorities.

Strategic Outlook: Focus on Rural, Green, and Digital Finance

ABC is committed to:

• Strengthening funding for rural development and expanding service coverage in county and rural areas.
• Supporting integrated urban-rural development, technological innovation, green finance, inclusive finance, pension finance, and digital finance.
• Aligning strategy with the Central Financial Work Conference’s guiding principles.

The fair value estimate is maintained at HKD 5.85, reflecting confidence in ABC’s ability to deliver steady returns despite sector challenges.

ESG Performance: Leading in Data Protection, Room for Governance Improvements

ABC’s ESG rating has been stable since December 2023. Key highlights include:

• Advanced staff management framework with a formal pipeline for talent development.
• Overall governance comparable to global peers, but lacking whistleblower protection.
• Leading data protection practices and industry-standard consumer protection measures.
• Proactive integration of ESG into lending, including climate risk analysis, though sector-specific ESG credit policies are lacking.

Potential Catalysts and Investment Risks

Catalysts:

• Less severe macroeconomic slowdown in rural regions than expected.
• Further improvements in asset quality.
• Stabilization of NIM trend exceeding expectations.

Risks:

• Slower-than-expected rural economic growth.
• Rising competition and potential deposit market share loss.
• Unexpectedly high operational or funding costs.
• Fee income contraction.

Financial Summary: Key Figures and Ratios

Company Overview: A Pillar of China’s Banking Sector

Established in 1951, ABC is the third largest bank in China by total assets, loans, and deposits.
The bank boasts the second largest domestic network with 22,877 branch outlets.
Originally an agricultural cooperative, ABC now provides significant credit support to both agricultural and urban business sectors.

Key Shareholder and Market Data

• Ticker: 1288.HK
• Market Cap: HKD 2,611.9 billion
• Daily Turnover: HKD 738.9 million
• Free Float: 23%
• Shares Outstanding: 349,983 million
• Top Shareholder: Ping An Asset Management (17.1%)

Profitability and Credit Ratios: Trends and Observations

• Return on Common Equity: Declined from 10.34% (FY20) to 9.03% (FY24)
• Return on Assets: Declined from 0.83% (FY20) to 0.68% (FY24)
• Operating Margin: Improved from 39.20% (FY20) to 44.10% (FY24)
• Dividend Payout Ratio: Stable around 30-33% in recent years
• Net Debt/EBIT: Rose from -3.56 (FY20) to 2.15 (FY24)

Conclusion: ABC’s Resilience and Positioning for Future Growth

Agricultural Bank of China has once again demonstrated its core strength in China’s banking sector, delivering steady profit growth, maintaining strong capital and asset quality metrics, and advancing its rural and ESG agendas. While headwinds remain, especially in terms of NIM pressure and competition, ABC’s diversified income streams and strategic rural focus make it a compelling holding for investors seeking exposure to China’s financial sector. With a maintained fair value estimate of HKD 5.85 and a consistent dividend payout, ABC stands out among its peers for resilience and potential long-term value.
For investors and analysts tracking the evolution of China’s banking industry, ABC’s latest results affirm its standing not just as a stable dividend play, but as a sector leader in operational discipline and strategic focus.