■ China banks’ net interest margins benefit from higher inflation and higher
bond yields given their low loan-to-deposit ratios.
■ We also argue their many defensive qualities make them a suitable inflation
hedge, amidst heightened investment and regulatory uncertainty.
■ These banks look well positioned for a strong 2Q21 rebound of net profit
growth in early-mid Aug 21, which could be a re-rating catalyst.
■ Reiterate sector OW on rebounding profit growth and improved asset quality.