UBS prefers stocks in China's banking sector due to fast earnings growth and high return on equity. Despite a slowdown in overall loan growth in mainland China, local banks in certain regions are still experiencing significant loan growth. UBS believes these banks have potential for market share gains during industry consolidation and expects leading local banks to achieve double-digit growth in net interest income, supporting strong profit growth in 2026. Their top picks include BANK OF HANGZHOU and BANK OF JIANGSU, while they assigned a Buy rating to CQRC BANK and maintained a Neutral rating on HUISHANG BANK.
