--- title: "Six Major \"Truths\" in Bank Annual Reports" type: "News" locale: "en" url: "https://longbridge.com/en/news/281525232.md" description: "As of April 2, 22 A-share listed banks have released their 2025 annual reports, with total assets of approximately 300 trillion, accounting for 70% of the total assets of commercial banks. Revenue growth experienced negative growth for the first time in 2023, but is expected to slightly increase by 1.2% in 2025. Negative growth in net interest income, along with growth in net fees and commissions, is key to turning positive. The decline in interest margins has narrowed, mainly influenced by industry self-discipline. The president of China Merchants Bank stated that revenue growth faces pressure, and future growth is difficult to predict" datetime: "2026-04-02T12:29:11.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/281525232.md) - [en](https://longbridge.com/en/news/281525232.md) - [zh-HK](https://longbridge.com/zh-HK/news/281525232.md) --- # Six Major "Truths" in Bank Annual Reports As of April 2, 22 listed banks in the A-share market have released their annual reports for 2025. These banks have total assets of approximately 300 trillion yuan, accounting for more than 70% of the total assets of all commercial banks, making the sample highly representative of the market. Reporters from Jiemian News attended performance briefings of several listed banks. Combining the annual reports and performance briefings, Jiemian News has summarized six major operational trends of current commercial banks: ### 1\. Revenue growth finally turns positive, but it's hard to say it's a turning point In the past, due to high interest margins and rapid balance sheet expansion, commercial banks were "charging ahead," with operating revenue continuously climbing. However, 2023 marked a turning point, with revenue growth experiencing negative growth for the first time (-4.1%), and continuing negative growth in 2024 (-0.5%), leading to a decline in revenue scale. But in 2025, revenue growth finally turned positive. The combined revenue scale of the 22 listed banks in the A-share market for 2025 is 5.2 trillion yuan, a slight increase of 1.2% year-on-year. Although the growth rate is low, it has finally bid farewell to negative growth. Reporters from Jiemian News organized data based on Tonghuashun ifind data. The revenue of commercial banks mainly consists of three parts: net interest income, net fee and commission income, and other non-interest income. In 2025, net interest income is expected to experience negative growth (detailed below), while the latter two, especially net fee and commission income growth, are key to turning revenue growth positive. There are many reasons for the growth in net fee and commission income, one important factor being the arrival of a bull market in the capital market. With the bull market, funds are easier to sell, and commercial banks have seen a significant increase in income from selling funds and other equity products. For example, China Merchants Bank (600036.SH) saw its fund agency income increase by 40% year-on-year, while Agricultural Bank of China (601288.SH) saw its agency business income increase by nearly 90% year-on-year. So, will revenue growth further increase or maintain positive values? It is hard to say, as all three sources of income face certain pressures. Wang Liang, president of China Merchants Bank, stated at the performance briefing: "Our revenue growth has indeed faced significant pressure in recent years. We expect growth to stabilize and improve this year. As for whether we can reach 3%-5%, it is still too early to say, but we will strive actively." ### 2\. Decline in interest margin narrows, with the biggest driving force coming from industry self-discipline In contrast, net interest income is the fundamental source of income for commercial banks, accounting for more than 70% of revenue and directly determining the banks' profitability. Among them, the interest margin is the core variable affecting net interest income, serving as the "lifeline" of commercial banks. According to Jiemian News reporters' analysis, in 2025, 18 listed banks showed a downward trend in net interest margin, but the decline has narrowed. Many banks attribute the narrowing of the interest margin decline to the decrease in deposit cost rates, which is an important factor, but the more significant reason is the substantial drop in interbank deposit costs. Taking Industrial and Commercial Bank of China (601398.SH) as an example, its liability cost decreased by 41 basis points, while general deposits (corporate + residential deposits) only decreased by 36 basis points, which is lower than the decline in liability costs; Interbank deposits (deposits from securities, insurance, and other institutions) decreased by 71 basis points, far exceeding the decline in liability costs. Screenshot from the Industrial and Commercial Bank of China annual report by Jiemian News The decline in interbank deposit costs is not only due to falling market interest rates but also, more importantly, due to the strengthening of self-regulatory supervision by the central bank. Before self-regulatory supervision, the interest rate on interbank demand deposits could reach as high as 3%, but by November 2024, regulatory requirements state that the interest rate on interbank demand deposits should not exceed 1.4%. Therefore, many listed banks will see a significant reduction in interbank deposit costs in 2025. Looking ahead to 2026, commercial banks face both challenges and opportunities in managing interest margins. On the challenge side, competition on the asset side is fierce. How fierce is it? By 2025, the loan yield of the four major state-owned banks (Industrial and Commercial Bank of China, Agricultural Bank of China, China Construction Bank, and Bank of China) has fallen below 3%, and many banks expect it to decline further this year. Opportunities mainly arise from the repricing of high-interest deposits upon maturity. Before 2023, the interest rates for 3-year and 5-year deposits once reached as high as 3%; now, the rates for the same terms are only around 1.5%. After repricing upon maturity, the cost of deposits will significantly decrease. If banks have a lot of high-interest deposits maturing this year, and they manage the follow-up well, their interest margins can stabilize or even slightly rebound. Coupled with asset expansion, high revenue growth is still possible, as seen with some city commercial banks. ### 3\. The bond bull market is over, banks "dig into their pockets" to increase revenue From 2023 to 2024, China's bond market has entered a vigorous bull market. The yield on 10-year government bonds fell from 2.85% at the beginning of 2023 to 1.65% at the end of 2024, a decrease of 120 basis points. Why is a decline in yields considered a bull market? Because in the bond market, bond yields are inversely proportional to bond prices: the higher the bond yield, the lower the bond price, indicating a bear market, and vice versa for a bull market. Currently, about 30% of commercial banks' assets are bonds, some of which are classified as trading financial assets. Changes in bond market value will directly affect fair value changes in profit and loss; a positive figure indicates a gain, while a negative figure indicates a loss. According to Tonghuashun ifind data, the fair value changes in profit and loss for 22 commercial banks from 2022 to 2024 were -45.5 billion yuan, 20.7 billion yuan, and 61.9 billion yuan, respectively. This means that in the bond bull markets of 2023 and 2024, the bond market contributed to an increase in fair value changes in profit and loss. Chart created by Jiemian News based on Tonghuashun ifind data However, in 2025, the yield on 10-year government bonds hovers around 1.8%, and the bond bull market is over. The fair value changes in profit and loss for 22 A-share commercial banks turned to -800 million yuan, a decrease of 62.7 billion yuan compared to the previous year, which has become a drag on other non-interest income What to do? The choice for listed banks is to sell bonds classified as FVOCI (Fair Value through Other Comprehensive Income). Bonds classified under FVOCI account have their market price fluctuations recorded in other comprehensive income (affecting equity), but when sold, the accumulated fair value changes of the bond assets are transferred to profit and loss (investment income), directly impacting the current net profit. In practice, commercial banks can adjust current profits by choosing the timing of sales, especially in years with significant performance pressure. For example, a certain bank purchased a 10-year government bond worth 100 million yuan in 2022, with an interest rate of 3%. Now, the yield on 10-year government bonds has dropped to 1.8%, resulting in an unrealized gain of about 6 million yuan recorded in other comprehensive income (equity). However, with significant pressure on performance growth, the bank sells this bond, and the 6 million yuan becomes investment income, significantly boosting current profits. According to Tonghuashun ifind data, the total investment income of 22 listed banks in 2025 is 487.8 billion yuan, an 18% increase compared to the previous year, offsetting the drag from fair value changes in profit and loss, thereby driving other non-interest income to stabilize and rise. However, this operation hides risks: the bank's asset yield will decline, essentially overdrawn future earnings for short-term improvement in reports. For instance, selling an old government bond with a coupon rate of 3% and reinvesting in a market environment with a coupon rate of only 1.8% creates a "spread gap" that will erode profitability in the long term. "Once the bond's unrealized gains are sold, they are gone; this concentrates future earnings into the present. Although there are still existing bonds, the foundation is being depleted." A person from the asset-liability department of a certain joint-stock bank frankly told Interface News. An anonymous banking industry expert told Interface News: "Bond investment largely relies on external factors. In the past two years, banks benefited from dividends, but last year there were none, and they could only sell the original high-yield bonds. Relatively speaking, large banks held more government bonds in the past and can smooth things out in the future." ### 4\. Profits are "squeezed" out, and future growth will continue In the banking industry, a well-known "secret" is that profits can be adjusted, but adjusting revenue is relatively difficult. Therefore, even though the 22 listed banks experienced negative revenue growth in 2023 and 2024, net profits still recorded around a 1% growth, with the secret lying in adjusting relevant indicators. One tactic is to sell bonds with unrealized gains, and another is to adjust provisions. Provisioning refers to turning part of today's profits into a "safety cushion" for tomorrow, to prevent being caught off guard when bad debts actually occur. For example, if a bank issues 10 billion yuan in loans at an average interest rate of 3%, the interest income for one year would be 300 million yuan. However, the bank believes that 1% (100 million yuan) of this 10 billion yuan may turn into bad debts, so the bank sets aside 100 million yuan from this 300 million yuan income into the provision account With a deduction of 100 million, the net profit for that year becomes 200 million instead of 300 million. This illustrates the relationship between provision accruals and net profit: as one increases, the other decreases; conversely, as one decreases, the other increases. In practice, there is significant "flexibility" in how much provision is accrued. "During the pandemic in 2020, because the revenue growth of industrial enterprises was far lower than that of banks, we correspondingly accrued more provisions, which lowered the annual profit growth," a person from the asset-liability department of a joint-stock bank told Jiemian News. According to data from Tonghuashun ifind, the credit impairment losses (provision accruals) of 22 listed banks in 2020 totaled 1.4 trillion yuan, a year-on-year increase of 16.7%. However, from 2021 to 2024, the scale of credit impairment losses continued to decrease to support profit growth. In 2025, with a revenue growth of 1.2%, the provision accruals did not decrease and were roughly the same as the previous year. Jiemian News reporter created the chart based on Tonghuashun ifind data. In addition, the way listed banks "squeeze" profits is by reducing the cost-to-income ratio and cutting expenses: for example, reducing labor costs through intelligent reforms, and cutting unnecessary management expenses. Xiang Youzhi, Vice President and Chief Financial Officer of Ping An Bank, stated that expense control should consider the big picture while paying attention to details. Ping An Bank is conducting specific trials in various fields. For instance, they are implementing a "small first floor, large second floor" model at branches, "trying to move branches upstairs because the costs are lower upstairs." Overall, through realizing bond floating profits, reducing provisions, and cutting expenses, listed banks achieved positive net profit growth in 2023 and 2024 despite a decline in revenue. In 2025, with a slight increase in revenue, provision accruals remained unchanged without growth, and the realization of bond floating profits and expense reductions continued. The 22 listed banks collectively achieved a net profit of 1.96 trillion yuan, a slight year-on-year increase of 1.3%. Looking ahead, the profit growth of listed banks remains assured, but the growth rate is expected to be modest. "The profitability of banks is still guaranteed; there is still room to sell bonds, reduce provisions, and cut costs," a banking industry expert told Jiemian News. ### 5\. Bonds "buy buy buy," corporate focus, retail weakness According to statistics from Jiemian News reporters, by the end of 2025, the total assets of 22 listed banks will reach 300 trillion yuan, an increase of 9.1% compared to the previous year, but the growth rates of various assets are not consistent. Jiemian News reporter created the chart based on Tonghuashun ifind data Among them, financial investment grew by 13.5%. Financial investment mainly refers to bond investment, and commercial banks have increased their bond allocation for two main reasons: first, insufficient credit demand; second, considering capital occupation, income tax, and credit risk, the returns from bond investments may be higher than those from loans. This also corresponds macroeconomically to the fiscal department increasing leverage. In 2025, the new quota for government bonds exceeded 10 trillion yuan for the first time, with commercial banks purchasing most of these bonds. Secondly, corporate loans grew by 9.7%, which is also a key support for banks' balance sheet expansion. Among them, Chongqing Bank (601963.SH), Qingdao Bank (002948.SZ), and other city commercial banks saw corporate loan growth rates exceeding 20%. "From our perspective, we do not have an issue with insufficient credit demand; our project reserves are quite sufficient, and the main constraint lies in capital," said a financial officer from a listed city commercial bank to Jiemian News. The reason for this is that stabilizing growth remains the main policy tone, infrastructure investment continues to gain momentum, major regional strategic projects are being implemented in batches, and local governments are at a critical period for debt resolution (needing to borrow new funds to repay old debts or extend terms), with multiple factors driving up corporate credit demand. In contrast, retail loans are very weak, with a growth rate of only 1.2%, and the retail loan balances of nine banks have contracted compared to the previous year. This is because household income and employment expectations have become cautious, leading to not only a reluctance to take out loans but also early repayments. Against the backdrop of weak retail loan growth, banks that excel in retail business (such as China Merchants Bank, Ping An Bank, and Postal Savings Bank) have either actively or passively increased their corporate loan issuance. For example, in 2025, China Merchants Bank's corporate loans grew by 12%, exceeding retail loan growth by 10 percentage points. The intense competition for high-quality corporate projects has pushed price competition to a fever pitch, with loan interest rates continuing to hit new lows. According to statistics from Jiemian News, in 2025, the yields on corporate loans from China Construction Bank, China Merchants Bank, Agricultural Bank of China, and Industrial and Commercial Bank of China have dropped to around 28%, while no retail loan yields have reached this level during the same period. Therefore, many banks still regard the development of retail business as an important strategy. The importance of retail business lies not only in higher returns and lower capital occupation but also in its ability to provide banks with a stable customer base and higher intermediary business income. However, for retail business to regain its brilliance, a macroeconomic and consumption recovery is needed. ### 6\. Intense domestic competition calls for "going out" In the face of increasingly fierce domestic competition, one option for domestic commercial banks is to "go out" and open up a "second growth curve." On one hand, Chinese enterprises are accelerating their overseas expansion, and commercial banks are following their clients "going out" to provide cross-border financial services; on the other hand, overseas interest rates are higher than domestic rates, leading to higher spreads and potentially greater income. For example, Bank of China, which excels in international business, saw its overseas institutions' operating income and total profit grow by 12.06% and 6.91% year-on-year in 2025, far exceeding domestic growth; China Merchants Bank's overseas institutions' operating income grew by 33.8% year-on-year in 2025, also significantly higher than domestic growth Many large and medium-sized commercial banks have regarded internationalization as an important strategy during the "14th Five-Year Plan" period. As the chairman of Industrial Bank, Lv Jiajin, stated at the industry performance meeting: "In the coming years, corporate overseas expansion will enter an accelerated phase. 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