China’s largest state-owned banks delivered stronger-than-expected first-quarter earnings, with rising interest income and steady asset quality pointing to improving credit demand as Beijing ramps up support for key sectors of the economy.

The Big Four lenders – Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB), Agricultural Bank of China (ABC) and Bank of China (BOC) – all reported growth in both revenue and net profit, marking a turnaround from the margin pressure seen in recent years.

Combined net profit reached about 305 billion yuan (US$44.6 billion) in the first three months of the year, according to their filings, equivalent to roughly 3.4 billion yuan a day during the period.

The rebound was driven in part by a recovery in net interest income, which rose more than 7 per cent across all four banks. Net interest margin, a key gauge of lenders’ profitability, also showed early signs of stabilisation after a prolonged decline, with some lenders reporting slight sequential improvements.

Analysts led by Judy Zhang at Citi said in a recent report that the stronger results were supported by “resilient loan growth driven by government-related loans”, as banks stepped up financing to infrastructure and policy-backed sectors such as manufacturing.

They added that large state-owned lenders outperformed peers due to their stronger exposure to corporate and government lending, while easing margin pressure and lower funding costs helped support a recovery in interest income.