--- title: "The Trillion Yuan Investment \"Chess Game\" of City Commercial Banks" type: "News" locale: "en" url: "https://longbridge.com/en/news/260824099.md" description: "City commercial banks are reshaping their business through securities trading during the economic downturn. In September, the scale of cash bond trading exceeded 10.57 trillion yuan, demonstrating their mainstream position in the bond market. Investment income has become an important component of city commercial banks' profits, with trading volumes gradually approaching those of joint-stock commercial banks. The enhancement of asset strength and market demand have driven their rapid growth in the bond market, changing the market landscape" datetime: "2025-10-13T03:12:16.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/260824099.md) - [en](https://longbridge.com/en/news/260824099.md) - [zh-HK](https://longbridge.com/zh-HK/news/260824099.md) generator: "portal-rs" --- # The Trillion Yuan Investment "Chess Game" of City Commercial Banks As the economy is slowly bottoming out, city commercial banks that are "persistent" about growth are reshaping their business and revenue structures through securities trading. According to the latest statistics, in September, the trading scale of cash bonds by city commercial banks exceeded 10.57 trillion yuan. It has remained at a high level since reaching a new annual high in July this year. This also indicates that the "mainstream" position of city commercial banks in bond market trading is about to arrive. The previously released interim reports of listed companies have shown that the "investment income" item supported by bond trading profits is increasingly becoming an "important pillar" of profits for city commercial banks, and is gradually becoming one of the relatively strong performance "backgrounds" in the industry. When assessing city commercial banks, their investment business is an essential aspect that cannot be overlooked. ## **Continuously Thriving Investment Trading** The enthusiasm of city commercial banks for investment trading has become very evident in the past few months. This thriving momentum is also changing the market landscape. According to authoritative data from China Monetary Network, this year, city commercial banks' trading of cash bonds in the interbank market has continued to rise, beginning to challenge the position of the largest investment group in the market—joint-stock banks. From the monthly data, the monthly trading scale of city commercial banks was still over 7 trillion yuan at the end of last year, directly surging to 10 trillion yuan in March this year. After a two-month decline and stabilization, it surged back to a scale of 10 trillion yuan in June and has not fallen below that since. The latest data for September shows that the trading scale of cash bonds by city commercial banks exceeded 10.57 trillion yuan. This figure is only slightly more than 280 billion yuan less than that of joint-stock commercial banks, which have the largest trading scale among banks. From another perspective, in February this year, city commercial banks had 7.5 trillion yuan compared to 10 trillion yuan for joint-stock banks, with a difference of 2.5 trillion yuan. By September this year, city commercial banks reached 10.57 trillion yuan compared to 10.85 trillion yuan for joint-stock banks, closing the gap rapidly. **If this momentum continues, the entire trading landscape of the bond market will change!** ## **Both Self-Strength and Subjective Desire** So, what is driving city commercial banks to "capture cities and conquer territories" in the bond market? The answer lies in two aspects of motivation. On one hand, it is the enhancement of the asset strength of city commercial banks themselves. Data from the China Banking Regulatory Commission shows that the year-on-year asset growth rate of mainland city commercial banks in the first eight months of this year has been between 8% and 11%, significantly exceeding that of large state-owned commercial banks, and is 1.5 times the average growth rate of joint-stock banks. More assets have brought about more allocation demands, which objectively pushed up the performance of city commercial banks in the bond market. On the other hand, more importantly, city commercial banks clearly have a strong willingness to increase their allocation to the domestic securities market. In terms of the ratio of asset scale at the end of the month to the trading volume for that month, city commercial banks with assets of 65 trillion corresponded to a trading volume of 10.2 trillion in August, resulting in a trading asset ratio of 1:6.5; in the same month, large commercial banks with total assets of 200 trillion corresponded to a trading volume of 3.6 trillion, with a trading asset ratio of 1:56; and joint-stock banks had a ratio of 1:6.6. Thus, it can be observed that **city commercial banks and joint-stock banks are generally more willing to allocate towards the investment market, with city commercial banks showing particularly pronounced characteristics of asset activation driven by trading. In contrast, state-owned large banks tend to hold a large amount of assets without movement.** Overall, the growth in trading volume for city commercial banks is not only a result of their strength but also driven by subjective willingness. ## **More Active and Influential City Commercial Banks** The increase in trading activity has also elevated the importance of investment business, further promoting the "status" of city commercial banks in the bond market. It is foreseeable that as the "prominence" of city commercial banks becomes more apparent, more teams from these banks will exhibit influence in the bond market (some regional city commercial banks have already demonstrated such influence), which will have many positive effects on the market and the industry. **Moreover, this increase in influence will also feed back into the investment performance of city commercial banks and is likely to have already impacted the trends and performance characteristics of the bond market.** In addition, this trend strongly "corresponds" with the performance of city commercial banks. It can be observed that in the past two quarterly reports (semi-annual reports), the contribution of investments has been continuously highlighted in the financial statements of city commercial banks. In related performance communication meetings, there has been a motivation to "gradually increase bond allocation during market adjustments" and "actively seek returns amid market fluctuations." ## **High-Performing City Commercial Banks Generally "Strengthen Investment"** The rise of investment among city commercial banks is also significantly impacting their own performance reports. According to previously released bank interim reports, as of mid-year this year, 30 A-share listed banks had a proportion of financial investments exceeding 30% of total assets, a notable increase compared to the same period last year. Among them, **the average proportion of financial assets for city commercial banks is the highest. Moreover, the better the performance and the stronger the recognized industry competitiveness, the more prominent the proportion of financial assets.** Preliminary statistics show that **the financial investment proportions of Hangzhou Bank, Nanjing Bank, Bank of Ningbo, Qilu Bank, Changsha Bank, Chongqing Bank, Bank of Shanghai, and Guiyang Bank all exceed 40%.** **The largest year-on-year change was observed in Chongqing Bank.** The semi-annual report shows that Chongqing Bank's financial investment scale increased by more than 146.8 billion yuan year-on-year, with the proportion of financial investments also growing by over 9 percentage points. Correspondingly, Chongqing Bank's revenue and profit growth rates have fully rebounded, exceeding the growth rates of the past three years. ## **Profit Structure Has Started to Change** The overall profit structure breakdown of the banking industry also shows similar institutions to the conclusions mentioned above. Additionally, according to the interim reports of major banks, **banks that place importance on financial investments often exhibit better performance growth rates.** The mid-term report shows that among the 42 A-share listed banks, more than half have seen their investment income grow year-on-year by 20% to 218%. The investment income drives intermediate income, which in turn contributes to overall performance; this virtuous cycle is commonly found in bank performance reports. In addition to the aforementioned situations, there are many backgrounds worth "chewing over." On one hand, influenced by the stabilization of the economy at a low point, the demand for traditional banking services has remained weak for the past two years, leading financial institutions to compete for existing business. The latest disclosed bank mid-term reports indicate that the net profit attributable to shareholders of the parent company for various banks has begun to transition from rapid growth to slow growth or even no growth. Revenue performance is lagging even further behind the net profit attributable to the parent company. On the other hand, competition in the business has intensified significantly. Although city commercial banks generally have a noticeable regional advantage, especially those in regions with better economic performance, the impact of market fluctuations on their traditional business is not as pronounced as that on joint-stock banks. However, a clear trend is that traditional, classic, and fragmented businesses are beginning to face challenges. At the same time, as the overall business landscape enters a phase of competition for existing business, more banks may start to enter overlapping business areas, with large banks gradually encroaching on the "comfort zone" of small and medium-sized banks. In this context, city commercial banks that are flexible in decision-making and proactive in their strategies are realistically choosing to strengthen market trading and strive for investment income. ## **Opportunities and Challenges Ahead** From the perspective of overseas bank revenues, wealth management and investment trading are important sources of profit, which differs from the absolute mainstream of traditional deposit and loan businesses in China. From this angle, the current development trend of city commercial banks is indeed aligned with this broader path. However, from another perspective, investment trading itself is a specialized, market-oriented business model with high returns and high risks. **The mass increase in investment business by city commercial banks means that their related business lines need comprehensive improvements in organizational structure, personnel allocation, processes, and risk control.** This may represent a future intersection of opportunities and challenges. On one hand, there is considerable uncertainty in realizing investment income. After gradually cashing out old debts, the future contribution of investment income relies on the establishment of relevant teams' own investment systems and business models. On the other hand, the development of investment business teams must not be halted. This long-term endeavor will continuously test the industry's commitment to investment. Investment income essentially assesses the comprehensive cognitive abilities of the investment management team, and whether the investment and research capabilities of small and medium-sized banks can support future investment energy is worth considering. Thirdly, assessment, incentives, and risk control are aspects that are more difficult to grasp and require a higher level of professionalism. For example, is the high yield in recent quarters driven by market trends or unique capability judgments? How to evaluate, how to incentivize, and how to prepare for the future? This will naturally attract the attention of relevant parties. At a recent press conference, the head of the Financial Market Department of the regulatory authority stated that **bond investment is an important component of bank assets, capable of supplementing income and serving the real economy in the current environment, but it also emphasizes the need to maintain a reasonable "degree" of investment to prevent credit and interest rate risks.** This indicates that it is still worth pondering. ## **Will equity investment become a new blue ocean?** In addition to a proactive stance on bond investments, some city commercial banks are also showing new performances in equity investments. From the recommendation of wealth management products, some city commercial banks have also focused on recommending certain equity-related products this year. For example, in the Ningyin Wealth Management's "Gold Digging" plan for November, in addition to diversified investment products, they also recommended science and technology innovation-themed wealth management. Suzhou Bank Wealth Management also has fixed income enhancement products with a scale exceeding 10 billion yuan. In the design of such products, the fixed income part includes flexible adjustment strategies for coupon rates, duration strategies, and convertible bond strategies. The multi-asset part flexibly allocates investment opportunities in stocks, public fund FOFs, and various styles in the gold market based on the market's phase characteristics. By adopting a multi-asset and multi-strategy approach, it achieves diversification of the entire product's sources of returns, which can adapt to different market styles at various stages. This direction is also very worthy of attention. Risk warning and disclaimer The market has risks, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial conditions, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. 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