The outlook for major Chinese banks, including Industrial & Commercial Bank of China, China Construction Bank, Agricultural Bank of China, and Bank of China, as well as international lenders like HSBC and Standard Chartered, may be overshadowed by the ongoing US-China trade tensions. Rising tariffs threaten to erode their margins, impacting earnings forecasts.
The ongoing US-China trade war continues to cast a shadow over the financial outlook of major Chinese banks, including Industrial & Commercial Bank of China Ltd. (ICBC), China Construction Bank Corp. (CCB), Agricultural Bank of China Ltd. (AgBank), and Bank of China Ltd. These lenders are expected to report their earnings soon, with analysts predicting that the US tariffs could significantly erode their margins. The trade conflict has led to concerns over China’s economic slowdown, heightening uncertainty in global markets.
According to Bloomberg Intelligence analysts, Francis Chan and Nicholas Ng, Chinese banks may face further pressures in the coming months, with calls for additional stimulus measures, such as rate cuts, becoming more likely. These measures are seen as necessary to counterbalance the risks posed by the US tariffs, which have already started to impact trade flows and economic activity in China.
The Chinese government’s need for economic stimulus is compounded by the growing risks posed by the US tariffs. The situation has led to expectations that the country’s banking sector will face tighter margins, further exacerbating an already challenging financial environment. At the same time, banks will need to navigate through this volatility, while considering any potential interest rate adjustments that may come in response to slowing economic conditions.
In an unexpected development, US President Donald Trump has shown signs of softening his stance toward China, with discussions about reducing tariffs on Chinese imports to deescalate tensions. However, despite these talks, Chinese officials have rejected claims of any significant progress in trade negotiations, indicating ongoing disconnect between the two nations.
Alongside Chinese banks, global financial institutions like HSBC Holdings Plc and Standard Chartered Plc are also under pressure. With both lenders heavily reliant on revenue from the Asian markets, nearly 40% of their earnings are vulnerable to declines in regional trade volume. This creates significant downside risk for their future earnings.
Looking ahead, earnings forecasts for Chinese banks, as well as global players like HSBC and Standard Chartered, are expected to be closely watched by analysts, as the US-China trade war continues to evolve. The impact of tariffs on revenue growth and margins will remain a key focus, particularly for those banks with significant exposure to the Asian market.
The upcoming earnings reports for Chinese banks, scheduled for next week, are expected to shed light on the full extent of these challenges and provide critical insights into the financial health of these major institutions.
Key Earnings Events to Watch:
- Monday: Oriental Land’s fourth-quarter operating profit expected to surge 51%, with focus on new midterm plan and pricing strategy.
- Tuesday: Earnings outlooks from Bank of China, ICBC, CCB, and AgBank as US tariffs weigh on earnings.
- Wednesday: Tokyo Electron’s fourth-quarter operating profit likely rose 25%, driven by high demand for AI memory chips.
- Friday: Standard Chartered’s quarterly adjusted pretax income expected to rise 1.6%, with interest rate cuts impacting lending margins.
As the global trade environment remains unpredictable, banks across China and the Asia-Pacific region will continue to adjust to evolving geopolitical and economic challenges.
