A safe haven amid Iran tensions—Bank of China stocks

Global markets are roiled by turmoil tied to the Iran war, and Chinese bank shares are gradually establishing themselves as a safe-haven asset, backed by stable dividend yields and improving earnings outlooks.

Since the outbreak of conflict in the Middle East, the CSI 300 Banks Index has gained 2.7% cumulatively, while the CSI 300 benchmark index has fallen 5.7% over the same period. Analysts point out that pressure on net interest margins at China’s large banks has continued to ease, coupled with strong growth in fee income, creating the possibility that first-quarter results could come in above expectations.

Against the backdrop of risk-off sentiment driving the market, Chinese bank shares’ expected dividend yield of about 5%—far higher than the CSI 300 index’s 2.8% and the roughly 1.8% yield on 10-year government bonds—offers significant appeal to investors seeking defensive positioning.

Easing net interest margin pressure, first-quarter results may beat expectations

Based on the annual figures already disclosed, the rate at which net interest margins at China’s largest state-owned banks have narrowed has become noticeably more pronounced.

Industrial and Commercial Bank of China and Agricultural Bank of China both saw their 2025 net interest margins narrow by 14 basis points year over year to 1.28%, respectively, while in 2024 the narrowing for the two banks was 19 basis points and 18 basis points, respectively, making the improvement trend fairly clear.

According to media reports, a Citigroup analyst said there is potential for China’s bank sector’s first-quarter performance to come in above expectations. Bank management has also sent more positive signals regarding the outlook for revenue growth. The main drivers include marginal improvement in net interest margin pressure and strong growth in fee income.

Wang Yifeng, Chief Financial Analyst at Everbright Securities, said:

“In the banking industry as a whole, or in some individual banks, net interest margins in the first quarter are expected to stabilize, and could even rebound. This will continue to attract investors’ attention.”

Outstanding dividend yield, defensive attributes highlighted

Against the backdrop of rising global geopolitical uncertainty, the dividend appeal of Chinese bank shares stands out even more.

According to data compiled by Bloomberg, the expected dividend yield over the next 12 months for China’s major bank stocks is about 5%—not only far above the CSI 300 index’s 2.8% overall level, but also well higher than the roughly 1.8% yield on 10-year government bonds.

Fu Zhifeng, Chief Investment Officer of Shanghai Chengzhou Investment Management, said:

“Given the relatively stable earnings outlook for China’s banking industry, China’s greater policy flexibility in responding to macro shocks, and the sector’s special status as a systemically important institution supported by the state, in an environment where geopolitical uncertainty persists, the price performance of Chinese bank stocks will show stronger resilience than other sectors.”