OCBC Investment Research
4 August 2025
Agricultural Bank of China 2025 Outlook: Resilience Amid Macroeconomic Challenges and Peer Comparison
Executive Summary
OCBC Investment Research provides a comprehensive update on the Agricultural Bank of China (ABC), one of China’s Big-4 state-owned banks. Despite ongoing macroeconomic pressures, ABC stands out for its earnings resilience, robust asset quality, and strong deposit franchise. This article meticulously examines ABC’s financial performance, sector positioning, risk factors, and peer comparison, delivering a must-read analysis for investors, analysts, and market watchers.
Investment Thesis: Focus on Quality and Stability
When investing in Chinese banks, prioritizing core quality holdings is key. Among the Big-4 state-owned banks, ABC is distinguished by its low exposure to risk assets and sector-leading liquidity. Its extensive deposit franchise further underpins its financial stability.
Highlights and Financial Performance
- Rating: HOLD (as at 4 August 2025)
- Last Close: CNY 6.33
- Fair Value Estimate: CNY 6.35 (revised down from CNY 6.65)
- Market Cap: CNY 2,184.3 billion
- Ticker: 601288.SS
- Free Float: 23%
- Top Shareholder: Central Huijin Investment Ltd. (44.0%)
2025 Earnings Outlook: Modest Growth Amid Margin Pressure
ABC is forecasted to deliver a slight increase in profit attributable to majority interests (PATMI), up 2% in FY25. This projection comes despite ongoing net interest margin (NIM) compression and anticipated higher credit impairment losses. Notably, ABC’s FY25 earnings per share (EPS) forecast has been revised down less than its major peers, highlighting its relative earnings resilience.
- 1Q25 Performance: PATMI grew 1.7% year-on-year to CNY 19.5 billion.
- Annualized ROE: 11.4%, down 0.9 percentage points year-on-year.
- Quarter-on-Quarter Growth: Total assets (+3.4%), loans and advances (+2.6%), and customer deposits (+4.3%).
Asset Quality: Strong Buffers Amid Property Sector Concerns
Despite a challenging macroeconomic landscape, ABC’s asset quality remains robust. China’s macro environment remains soft, with overall CNY loan growth moderating to 7.1% YoY in June 2025. New CNY loans rose 5.2% YoY in June, reversing recent sharp dips. Mortgage rates edged up slightly to 3.13% in 1Q25, still down 101bps year-on-year, keeping NIM pressures alive.
- Residential Property Sector: Transaction values fell 5.2% YoY in 1H25; prices declined across 70 major cities in June 2025.
- NPL Ratio: 1.28% as of 31 March 2025, down 2bps QoQ.
- NPL Coverage Ratio: 298%, among the highest in the sector despite a slight dip of 1.8 percentage points QoQ.
ABC’s substantial provisioning and coverage ratios provide a cushion against negative shocks to pre-provision operating profits (PPoP).
Valuation and Financial Summary
ABC’s fair value estimate has been adjusted to CNY 6.35, applying a 0.83x target price-to-book (P/B) multiple on FY26 book value per share.
| Financial Summary (CNY b) |
FY24 |
FY25E |
FY26E |
| Operating income |
711.4 |
722.7 |
760.6 |
| Pre-provision profits |
450.2 |
457.5 |
482.2 |
| PATMI |
262.8 |
266.9 |
274.5 |
| EPS (CNY) |
0.8 |
0.8 |
0.7 |
| DPS (CNY) |
0.2 |
0.2 |
0.2 |
| Key Ratios |
FY24 |
FY25E |
FY26E |
| P/E (x) |
8.4 |
8.3 |
8.6 |
| P/B (x) |
0.9 |
0.8 |
0.8 |
| ROA (%) |
0.6 |
0.6 |
0.6 |
| ROE (%) |
10.5 |
10.0 |
9.5 |
| Dividend yield (%) |
3.8 |
3.9 |
3.6 |
Peer Comparison: Sector-Wide Metrics
| Bank |
P/E (x) FY25E |
P/E (x) FY26E |
P/B (x) FY25E |
P/B (x) FY26E |
Dividend Yield (%) FY25E |
Dividend Yield (%) FY26E |
ROE (%) FY25E |
ROE (%) FY26E |
| Agricultural Bank of China (601288.SS) |
8.2 |
8.1 |
0.8 |
0.7 |
3.8 |
3.9 |
10.1 |
9.8 |
| China Construction Bank (601939.SS) |
7.4 |
7.3 |
0.7 |
0.7 |
4.1 |
4.2 |
10.0 |
9.5 |
| Bank of China (601988.SS) |
7.5 |
7.5 |
0.6 |
0.6 |
4.2 |
4.3 |
8.9 |
8.5 |
| Industrial and Commercial Bank of China (601398.SS) |
7.8 |
7.6 |
0.7 |
0.7 |
4.0 |
4.1 |
9.3 |
8.9 |
Company Overview: Agricultural Bank of China
Founded in 1951, ABC initially operated as an agricultural cooperative bank and evolved into a state-owned commercial bank after restructuring in the late 1990s. The bank completed a major recapitalization and was listed in Hong Kong in 2010. Today, ABC is China’s third largest bank by total assets, loans, and deposits, with the country’s second-largest domestic network (22,877 branches).
- FY24 Revenue Breakdown:
- Corporate Banking: 39.2%
- Retail Banking: 54.8%
- Treasury Operations: 2.7%
- Others: 3.3%
- FY24 Operating Income Breakdown:
- Corporate Banking: 47.1%
- Retail Banking: 54.5%
- Treasury Operations: -5.4%
- Others: 3.7%
ESG Performance and Governance Updates
ABC’s ESG rating has remained stable since December 2023. The bank distinguishes itself in staff management with formal pipeline strategies for talent development. Its governance is on par with global peers, and business ethics protocols include anti-money laundering policies; however, whistleblower protection appears absent. ABC leads in data protection and offers consumer safeguards aligned with industry standards.
Potential Catalysts and Risks
- Potential Catalysts:
- Macroeconomic slowdown in rural areas is less severe than expected
- Further improvement in asset quality
- Stronger than anticipated stabilization in NIM trends
- Key Risks:
- Underperformance in China’s rural economy
- Intense competition and possible loss of deposit market share
- Higher operational and funding costs
- Slower fee income growth
Comprehensive Financial Table: ABC Historical Performance
| In Millions of CNY except Per Share |
FY2020 |
FY2021 |
FY2022 |
FY2023 |
FY2024 |
| Revenue |
1,062,074.0 |
1,159,000.0 |
1,231,457.0 |
1,359,437.0 |
1,418,799.0 |
| Pretax Income |
265,050.0 |
295,880.0 |
306,453.0 |
307,419.0 |
319,201.0 |
| Net Income/Net Profit |
215,925.0 |
241,183.0 |
259,232.0 |
269,356.0 |
282,083.0 |
| Net Income to Common Shareholders |
206,395.0 |
227,385.0 |
241,993.0 |
253,293.0 |
262,800.0 |
| Basic Earnings per Share (CNY) |
0.6 |
0.6 |
0.7 |
0.7 |
0.8 |
| Return on Common Equity (%) |
10.34 |
10.20 |
9.83 |
9.39 |
9.03 |
| Return on Assets (%) |
0.83 |
0.86 |
0.82 |
0.73 |
0.68 |
| Net Income Margin (%) |
22.17 |
22.56 |
21.83 |
20.70 |
20.60 |
| Dividend Payout Ratio (%) |
32.03 |
30.35 |
30.79 |
31.81 |
32.98 |
| Sustainable Growth Rate (%) |
10.30 |
10.17 |
9.80 |
9.36 |
9.00 |
Conclusion: A Prudent Hold Amid Sector Headwinds
ABC continues to demonstrate resilience in a challenging environment, supported by its solid asset quality, robust deposit base, and prudent management. However, with ongoing NIM compression, property sector weakness, and macroeconomic uncertainty, the outlook warrants a HOLD rating. Investors are advised to monitor rural economic trends, asset quality developments, and competitive dynamics for any signs of positive or negative inflection.
