Wider lending margins will mark a difference between the largest Chinese banks and their smaller rivals as the industry begins reporting third-quarter earnings, according to investment bankers Keefe, Bruyette & Woods Inc.
"Net interest margin is the critical issue to review in these results," Bill Stacey, a Hong Kong-based analyst, wrote in a note published on Tuesday.
"Excessive interbank lending looked like it might emerge as a problem for the sector. We believe that margin pressure from that source is likely to be concentrated among smaller banks."
Net interest margins, a measure of lending profitability, are being squeezed by China's deregulation of interest rates, which limits banks' pricing power on loans.
The nation's four biggest banks may have seen their third-quarter margins narrow by as much as 3 basis points from the previous quarter, while declines at smaller rivals may have reached 7 basis points, Stacey wrote.
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