Residents of a small town propel Agricultural Bank of China to the top of the A-share market.

Author | Wang Hanyu

Editor | Zhang Fan

After climbing steadily for two and a half years in the secondary market, the stock prices of the four major state - owned banks fluctuated slightly after mid - July. However, the Agricultural Bank of China stood out, maintaining a strong overall momentum.

As of September 30, the A - share of the Agricultural Bank of China had risen by 30.56% this year, while the other three major banks' increases during the same period ranged from - 1% to 10%.

Looking at a longer period, since the four major banks, namely the Industrial and Commercial Bank of China (ICBC), the Agricultural Bank of China (ABC), the China Construction Bank (CCB), and the Bank of China (BOC), started the current round of growth in March 2023, the cumulative increase of ABC's A - shares in the market has exceeded 168%. In contrast, the increases of ICBC, CCB, and BOC were approximately 99%, 81%, and 88% respectively.

The range increase of the Agricultural Bank of China. Source: Wind

On September 4, this "comeback" reached a critical point: the total market value of ABC's A + H shares exceeded that of ICBC, which had long held the title of the "world's largest bank," for the first time, and ABC was crowned the new "king of A - shares" for a while.

With the general rise of state - owned large - scale banks, why did the Agricultural Bank of China lead the increase significantly?

The Only One with Positive Net Profit Growth among the Four Major Banks

In the first half of 2025, state - owned large - scale banks continued to face the pressure of narrowing interest margins. The net profits of ICBC, CCB, and BOC all decreased year - on - year. However, ABC achieved a year - on - year net profit growth of 2.53%, reaching 139.943 billion yuan, becoming the only institution among the four major banks to maintain positive growth.

Comparison of the net profit growth rates of the four major banks in the first half of this year. Source: Wind

Comparison of the net profit growth rates of the four major banks in the first half of this year. Source: Wind

Further analysis shows that ABC's market structure mainly focused on county - level areas alleviated the pressure on interest margins to a certain extent.

On the liability side, in the first half of 2025, the balance of deposits absorbed by ABC in county - level financial markets reached 13.98 trillion yuan, accounting for more than 50% of the bank's total domestic deposits. It is the only bank among the four major banks whose deposits mainly come from county - level customers.

Generally, the cost of deposits from the county - level market is relatively low. On the one hand, residents in county - level areas have a strong willingness to save, and the funds are highly stable. Banks do not need to compete for deposits with high - interest rates as they do in urban markets. On the other hand, as of the end of the first half of the year, the proportion of ABC's county - level branches increased to 56.6%, and the cost of reaching county - level customers is lower than that of its peers.

In terms of data, in the first half of 2025, the average interest payment rate of ABC's RMB deposits decreased by 28 basis points year - on - year to 1.42%. Among them, the average interest payment rate of county - level deposits further decreased to 1.35%. During the same period, the average daily increase in domestic personal deposits was 1.66 trillion yuan, ranking first among comparable peers.

On the asset side, the yield of county - level loans is also higher than that of urban loans. ABC's financial report shows that in the first half of this year, the average yield of its county - level loans was 3.09%, 12 basis points higher than the overall loan yield. Among the total loan scale, the balance of county - level loans exceeded 10 trillion yuan, accounting for 40.9%.

Generally speaking, the credit demand in county - level areas is mainly from small and micro - enterprises, farmers, and rural revitalization projects, with stronger risk - pricing capabilities. Moreover, county - level loans are less affected by cyclical fluctuations in industries such as real estate.

Therefore, against the background that the current 1 - year LPR has dropped to 3.45%, ABC's business structure mainly focused on county - level areas can attract deposits with lower interest - payment costs and then invest the funds in more stable - income areas.

In contrast, ICBC and CCB are more dependent on the real - estate cycle and corporate business. For example, as of the end of June 2025, the balance of ICBC's personal housing loans accounted for 20.1% of the bank's total loan balance. In the first half of 2025, CCB's loans increased by 1.6 trillion yuan, of which

the new corporate loans reached 1.24 trillion yuan, indicating that corporate customers are still the main driving force for the bank's loan growth.

In terms of revenue performance, ICBC and CCB were more significantly affected by the decline in LPR. The interest income from customer loans and advances decreased by 10.4% and 10.52% year - on - year respectively, and the average yield of customer loans and advances decreased by 60 and 59 basis points respectively. The declines of ABC in these two aspects were slightly narrower, with a decrease of 8.5% and 57 basis points respectively.

In addition, BOC has a larger proportion of overseas business. In the first half of this year, the total revenue from Hong Kong, Macao, Taiwan, and other countries and regions accounted for 23.77%. Although the revenue scale increased slightly year - on - year, expanding globalization in the current environment may, to a certain extent, increase investors' concerns about its business being dragged down by international trade and foreign - exchange fluctuations.

ABC's structure of "mainly county - level, less corporate, and weak overseas" avoids the current major risk points in the industry and matches the mainstream risk preference of investors who pursue certain returns.

The Rotation of the "World's Largest Bank"

ABC's only positive - growth profit performance among the four major banks gave a boost to the market. Since the release of the semi - annual report, ABC's performance has been stronger. As of September 4, the total market value of its A + H shares reached approximately 2.55 trillion yuan, exceeding ICBC's 2.49 trillion yuan for the first time and winning the title of the "world's largest bank."

Previously, on August 6, ABC's A - share free - float market value reached the top, reaching 2.11 trillion yuan, exceeding ICBC's 2.09 trillion yuan in A - shares.

Reaching a new high for the second time within less than a month is due to its relatively stable operation and asset quality on the one hand, and also benefits from its equity structure with a lower proportion of H - shares on the other hand.

Asset quality is an important criterion for the valuation of bank stocks. Judging from the three major indicators disclosed in the semi - annual report, ABC's non - performing loan ratio dropped to 1.28%, 2 basis points lower than at the beginning of the year, lower than ICBC's and CCB's 1.33%. The special - mention loan ratio is 1.39%, and the overdue loan ratio is 1.22%, both at a low level among peers. The balance of provisions exceeded 1.1 trillion yuan, and the provision - coverage ratio rose to 295%, a 5 - percentage - point increase from the beginning of the year, ranking first among the four major banks.

This shows ABC's relatively solid risk - covering ability. At the same time, stable profitability and risk - resistance ability also form the basis for dividend distribution.

ABC's board of directors recommended distributing an interim cash dividend of 1.195 yuan (tax - included) per 10 shares to common - stock shareholders in 2025, with a total of 41.823 billion yuan (tax - included). As of September 10, its dividend yield was approximately 3.36%, higher than CCB's 3.05% and lower than ICBC's 4.10% and BOC's 3.95%.

However, compared with the less - than - 2% 10 - year Treasury bond yield and the generally about 1% one - year deposit interest rate, bank stocks, including ABC, are still the first choice for many investors, especially long - term funds such as insurance funds.

As of August 30 this year, the market value of ABC's stocks held by the Social Security Fund has exceeded 138.3 billion yuan. Among insurance funds, Ping An Life Insurance also increased its holdings of ABC's H - shares several times this year. As of August 26, it held more than 15% of ABC's H - share capital.

With strong performance stability, high - quality assets, and the attribute of dividend - paying assets with a reasonable dividend yield, ABC has formed a virtuous cycle in which large - scale capital inflows drive up the stock price, the rising stock price pushes up the dividend yield, and the higher dividend yield attracts more capital inflows. This has also become the main driving force for its previous market - value breakthrough.

It is worth noting that among the four major banks listed on both A - and H - shares, ABC has the lowest proportion of H - share floating stocks, which is also an objective factor making its total market value "seem" higher.

Currently, due to differences such as a large number of institutional investors in the H - share market, the support for short - selling mechanisms, high trading taxes and fees, and low liquidity, A + H listed companies generally face the problem of "H - share discount." In this reality, the proportions of H - shares of ICBC, CCB, and BOC are 24%, 92%, and 26% respectively. While ABC's H - share proportion is only 9%, it is naturally less affected by the "valuation discount." Coupled with the continuous inflow of A - share funds, ABC's total market value finally exceeded that of ICBC for a while.

Comparison of the equity and market value of the A + H shares of the four major banks (as of September 10). Data source: Wind. Chart by 36Kr

However, after several days of adjustment, Wind data as of September 30 showed that ABC's total market value dropped to approximately 2.28 trillion yuan, while ICBC's rose to 2.42 trillion yuan, regaining the title of the "world's largest bank."

The Incremental Space in the Down - to - Earth Market

As of September 30, the gap in the total market value between ABC and ICBC widened to about 145.3 billion yuan. The title of the "world's largest bank" may still rotate. Looking forward, the key variable for ABC's valuation repair depends on its grasp of the policy dividends for supporting agriculture and the potential of the down - to - earth market.

Previously, the semi - annual report disclosed that as of the end of June this year, the balance of ABC's county - level loans was 10.77 trillion yuan, with a new increase of 916.4 billion yuan, a growth rate of 9.3%, 2.0 percentage points higher than the bank's average level. The balance accounted for 40.9% of domestic loans. In addition, in the first half of the year, the growth rate of ABC's inclusive small and micro - enterprise loans was 18.5%, 11.2 percentage points higher than the bank's overall loan growth rate. This shows that it has a good customer base in the down - to - earth market.

Not long ago, on May 7, the People's Bank of China announced that it would increase the quota of re - loans for supporting agriculture and small - scale enterprises by 300 billion yuan to encourage and guide local corporate financial institutions to further increase credit support for agriculture - related, small - scale, and private enterprises. At the same time, the re - loan interest rate was lowered by 0.25 percentage points. After that, the re - loan interest rates for 3 - month, 6 - month, and 1 - year terms for supporting agriculture and small - scale enterprises were 1.2%, 1.4%, and 1.5% respectively, significantly lower than the current 1 - year LPR level of 3.0%.

Re - loans for supporting agriculture and small - scale enterprises are long - term tools to support inclusive finance. The central bank has continuously increased its support in recent years and lowered the interest rate, directly enhancing the attractiveness of ABC's loan products mainly targeting county - level customers.

In addition, there is also greater growth space in the non - interest income level in the county - level market. For example, previously, ABC's personal customer AUM (asset management scale) reached 18 trillion yuan, but the average household wealth management was only 30,000 yuan, indicating that there is a large space for increasing the penetration rate in this area in the county - level market. Against this background, in the first half of 2025, ABC's net income from fees and commissions was 51.441 billion yuan, a year - on - year increase of 10.1%. Among them, the agency business income increased significantly by 62.3%.

The market structure with low penetration rate and high growth rate is expected to enable ABC to maintain a certain growth momentum.

At the same time, the Ministry of Finance's issuance of the first batch of 500 billion yuan of special treasury bonds to inject capital into four state - owned banks also makes ABC, as a peer, benefit from the expectation of improved liquidity.

In March this year, CCB, BOC, Bank of Communications, and Postal Savings Bank of China simultaneously announced private - placement plans, raising a total of 520 billion yuan, all for supplementing core tier - one capital. As the main subscriber, the Ministry of Finance invested 500 billion yuan through the issuance of special treasury bonds.

Although ABC is not among the first - batch institutions to receive capital injection, it may indirectly benefit from the improved liquidity brought about by this. Some market views believe that capital supplementation will directly enhance the bank's ability to serve the real economy. If calculated according to an 8 - fold multiplier effect, the 500 - billion - yuan capital injection can leverage about 4 trillion yuan of credit increment, which may drive the recovery of credit demand from small and micro - enterprises in county - level areas.

From an investment perspective, ABC's value lies not only in the achieved increase but also in the unconfirmed expectations. The policy dividends for supporting agriculture and the low penetration rate in county - level areas may support its valuation repair, while the pressure on net interest margins and the slowdown in asset expansion are also variables affecting its valuation fluctuations. In the first half of 2025, although ABC's net interest margin