A rare uptick in margins lifted Chinese lenders in the second quarter, but falling loan demand and policy constraints loom large
2-MIN READ2-MINDaisy WuPublished: 2:00pm, 18 Aug 2026Chinese commercial banks recorded a rare, modest uptick in net interest margin (NIM) in the second quarter of 2026, marking the sector’s first quarterly expansion in the profitability indicator since 2022, even as underlying loan demand remained weak.Average NIM for commercial banks edged up 1 basis point to 1.41 per cent in the June quarter, from 1.40 per cent in the first quarter, according to the latest data released by the National Financial Regulatory Administration.
Performance diverged across sector tiers. State-owned lenders, city commercial banks, rural commercial banks and private banks all posted quarter-on-quarter gains, while joint-stock banks were unchanged and foreign banks saw margins narrow further.
This ongoing trend of weak loan demand is likely to put pressure on banks’ balance sheet expansion, asset yields and NIM in the second halfJohnny Xie, Deutsche BankTotal social financing rose 1.4 trillion yuan in July, beating market expectations, as accelerated government and corporate bond issuance offset weaker bank lending, analysts said.
