Public Bank Annual Report Review | Public Banks' Retail Business Structure Undergoing Deep Reorganization

Ask AI · As retail credit non-performing rates rise, what new risk-control strategies do banks have?

In an environment where net interest margins have narrowed to historic lows, the traditional “profit-from-interest-spread” model is no longer sustainable. With retail business as the core of the “light-capital” transformation, its strategic importance has, in recent years, only increased rather than declined. As 2025 earnings reports are released one after another, the “real quality” of listed banks’ retail transformation is facing its most direct test.

Based on disclosures from multiple listed banks, over the past year, listed banks’ retail business has continued to show characteristics such as deep structural adjustments and accelerated risk clean-up. In terms of performance indicators, some banks have said that “the turning point has basically appeared,” while others are still working through the “tough bones” of transformation. Looking ahead, many listed banks have said they will continue to strengthen wealth management as a key engine for generating fee and commission income, optimize retail credit strategies, and firmly build the bottom line for risk control, using a “combination of moves” to broaden development space for retail business.

AUM growth and agency business performing well have become highlights

Against the backdrop of falling interest rates, narrowing spreads, and fee reductions and concessions, what highlights and divergences have emerged in listed banks’ retail performance over the past year?

The reporter from China Banking and Insurance News has found that steady growth in personal asset management scale (AUM) is one major highlight. According to earnings reports, among state-owned banks, the four major banks—Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, and China Construction Bank—each saw double-digit AUM growth over the past year. Among them, Industrial and Commercial Bank of China’s personal AUM even surpassed 25 trillion, taking the lead with an increase of 11.08%. Among joint-stock banks, China Merchants Bank, known as the “retail king,” saw its personal AUM exceed 17 trillion; over the year, it added more than 2 trillion, setting a new high for the bank. Meanwhile, Shanghai Pudong Development Bank and Zheshang Bank’s personal AUM rose by 23.66% and 22.91%, respectively, maintaining relatively high growth rates. For smaller and mid-sized banks, by the end of 2025, Huishang Bank’s personal AUM grew by 14%, and private banking clients’ AUM grew by 20.4%, with retail business accelerating its move into new territory.

At the same time, benefiting from the continued improvement of capital markets in 2025, many listed banks’ wealth management businesses have performed well, and the boost to intermediary business income should not be overlooked. “Over the past year, listed banks’ agency fund distribution business has seen clear improvement, becoming a new business highlight. Retail deposits have also performed well, becoming a primary support for bank deposit growth.” Liao Zhiming, Chief Fixed Income Analyst at Huayuan Securities, commented to the reporter.

Compared with the thriving picture on the liabilities side, retail credit growth has been somewhat lackluster due to changes in the market environment. Structurally, consumer loans have become a new growth point. Over the past year, leading listed banks such as China Construction Bank, Bank of China, and Postal Savings Bank of China all saw consumer loans grow by double digits. Meanwhile, the contraction of the credit card business has continued to be the mainstream trend.

What deserves attention is that, as a series of policies to stabilize growth are implemented and banks strengthen their “internal capabilities” as part of their transformation, some banks have already seen “signs of dawn” in improving asset conditions.

Wang Jun, Assistant President of Ping An Bank, said that in recent years, Ping An Bank has proactively focused on digesting high-risk assets and resolutely exited high-risk customer groups, which led to a contraction in the scale of retail loans. At present, adjustments to asset structure have basically been completed. The bank will wait patiently for the market to pick up again, reshape growth drivers, and the “inflection point” for retail business has basically appeared.

Liang Shidong, Director of Retail Business at Postal Savings Bank of China, said that consumption is currently in a recovery stage. However, with various policies to promote consumption continuing to gain traction—especially interest subsidy policies—overall demand has shown a steady improvement. This year, Postal Savings Bank’s quota-based consumer loans have maintained high growth; new loans exceeded 200 billion, up more than 80% year over year.

Under pressure from non-performing loans, improving risk control awaits the “turning point”

Asset quality is the lifeline of a bank’s prudent operations. According to estimates by a team led by Ni Jun, Chief Analyst for the banking industry at GF Securities, as of the end of 2025, the retail credit non-performing loan ratio of 22 listed banks that had disclosed their performance had risen by 0.24 percentage points from the beginning of the year to 1.71%. Among them, non-performing ratios for credit cards, consumer loans, and mortgages increased by 0.12 percentage points, 0.10 percentage points, and 0.07 percentage points, respectively.

It can be seen that, even in a backdrop where banks’ overall non-performing loan ratios are generally declining or stable, doing a good job of managing non-performing risks in retail business still remains the industry’s “mandatory question.”

The reporter noted that currently, listed banks mainly build their risk-control systems from three dimensions: strict controls on entry, technology-enabled capabilities, and the resolution of existing risks. In terms of strategy, there is a clear shift from “scaling up” to “prioritizing quality.”

“Although inclusive retail loans have the characteristics of being ‘small, dispersed, and numerous,’ we will not let them become ‘a scattered mess.’ Instead, we aim for them to be ‘clean and well-presented.’” Lin Li, Vice President of Agricultural Bank of China, said clearly that Agricultural Bank will continue to strengthen an all-round control mechanism covering, among other things, improving the management of the authenticity of customer admission, coordinating online and offline processes, and using separation mechanisms between credit approval and loan approval. It will step up efforts to manage delinquencies and handle bad-debt resolution, catch problems early through timely reminders, carry out delinquency collection more effectively, and tighten accountability for control.

Huang Hongri, Vice President of Minsheng Bank, said that currently, the main pressure on asset quality in the bank’s large retail segment comes from credit cards. Minsheng Bank will proactively adjust its business strategy, strictly control new customer admission, strengthen management of existing exposures, and step up measures such as bad-debt clean-up and resolution, to stabilize the asset quality of large retail business as soon as possible.

“Adjustments in the real estate market, together with pressures from residents’ employment and income growth, still pose certain risks to the asset quality of retail credit. However, the growth rate of non-performing loans for micro and small business loans and consumer loans has shown signs of slowing down.” Wang Liang, President and CEO of China Merchants Bank, introduced. Going forward, the bank will raise admission standards, especially for consumer loans and micro and small loans. At the same time, it will dynamically adjust customer segments, continuously optimize customer structure, take proactive measures to control risks in retail credit, and ensure that the quality of retail credit remains basically controllable.

Ni Jun’s team expects that, as consumer market activity improves and service industries continue to recover, employment absorption capacity will further strengthen. This will drive the movement of people back to core cities. The real estate market and consumption demand in key first-tier cities may gradually stabilize, and retail loan asset pressures are expected to be gradually eased accordingly.

New growth points in wealth management and the “good housing” sector

Looking ahead to 2026, on the liabilities side, in the face of the dual challenges of a declining interest-rate cycle and “deposit migration,” listed banks’ retail business will continue to accelerate the shift from “deposits-first” to “AUM as king.” On the asset side, aside from building a solid risk-control bottom line, finding structural opportunities will become a key to expanding the incremental growth of credit business.

Seize the wealth management opportunities brought by “deposit migration.” Lu Wei, President of Postal Savings Bank of China, said that currently, Postal Savings Bank’s AUM is mainly deposit-based. This year, it will seize market opportunities to achieve significant growth in non-deposit AUM, striving to convert deposit advantages into wealth-management advantages. Miao Jianmin, Chairman of China Merchants Bank, emphasized that “an important breakthrough for retail business in the future lies in wealth management.” Next, assets need to be improved in quality, liabilities need to be consolidated, and wealth management should reach a new level.

“In a low-interest-rate environment, some deposits are gradually shifting to diversified asset allocations such as funds, wealth management products, and insurance. This creates important opportunities for banks to expand retail fee income.” Liao Zhiming said. The core focus for listed banks’ retail business in 2026 is to increase intermediary business income. Whether it is agency distribution of funds and insurance, or the bank’s wealth management business itself, all have significant potential to increase income.

Explore new growth points in real estate transformation and upgrading, and in boosting domestic demand. Wang Jingwu, Vice President of Industrial and Commercial Bank of China, introduced that going forward, Industrial and Commercial Bank of China will implement national plans regarding building new models for real estate development. It will innovate financial service models to enhance the supply of consumer finance. It will address weaknesses in financial services, improve service quality and effectiveness in county-level areas involving agriculture and businesses in the commercial and trade sectors. Zhang Yi, President of China Construction Bank, pointed out that in 2026, CCB will deepen a special action on consumer finance, use fiscal and financial coordination to promote a package of policies that boost domestic demand. At the same time, it will apply city-specific policies to improve the way it handles first- and second-hand housing, strengthening the market competitiveness of CCB’s personal housing financial services. “We will adhere to the principles of ‘prudent operation and compliant development,’ optimize the combined strategy of retail credit products, and actively expand new tracks and new scenarios for inclusive operations loans and consumer loans.” Yang Bingbing, Vice President of Everbright Bank, introduced.

“As economic development gradually moves from the stage of ‘creating financial wealth through incremental debt’ to the stage of ‘pursuing asset allocation of existing wealth,’ in the future, the asset side of retail business should place greater emphasis on developing ‘real micro and small’ business. On the liabilities side, it should focus on residents’ increasingly growing wealth management needs.” Wang Xianshuang, Assistant Director of the Research Institute at Guolian Minsheng Securities, told the reporter.

China Banking and Insurance News reporter Xu Yupeng