The concept of a competitive edge for joint-stock banks needs redefinition. At the 2025 annual results conference, the chairman of China Merchants Bank, often called the 'retail king', offered one perspective. He highlighted the bank's culture of dedication, noting that employees rarely leave on time, as people drive the operations behind the bank's philosophy, management, and technology. He contrasted this with other banks, stating that visits to branches after 5 PM reveal a stark difference.
This comment sparked significant online discussion, with some netizens remarking that the bank's competitive edge seems built on employee sweat and tears. Some banking professionals added that overtime often stems from internal reporting and meetings rather than direct customer service.
As industry growth slows and retail dividends diminish, the traditional growth model reliant on organizational execution, deep customer relationships, and high front-end investment is facing challenges. In 2025, China Merchants Bank's profit per employee exceeded 1.23 million yuan, yet the average salary per employee dropped to 564,900 yuan, marking a fourth consecutive annual decline.
In January, the bank was ranked top for the second consecutive year in a 'Best Employer' survey, also winning awards for social responsibility and being a preferred employer for women. Historically, financial institutions were seen as good employers due to high income, strong platforms, and stable career prospects. However, the criteria for external evaluation are shifting.
During high-growth periods, banks could offset intense workloads with higher pay, faster promotions, and strong corporate prestige. In the current low-growth era, this compensation mechanism is weakening, leading to reduced employee tolerance for long hours. Factors like quality of life, work-life boundaries, salary growth, and long-term sustainability are now integral to the evaluation.
The coexistence of high efficiency with low employee satisfaction, and a strong brand with demanding hours, has prompted the industry to re-examine the true cost behind the 'high-quality growth' exemplified by banks like China Merchants Bank.
Over the past two decades, China Merchants Bank built the most exemplary retail model among joint-stock banks. This was achieved through rapid retail finance development, a deep wealth management system, substantial IT investment, and strong organizational execution. Its branch transformation focused early on lean, functional operations, and its customer management evolved from metric-driven to process-controlled, and then to data-driven. Its layered customer manager system and specialized wealth advisor framework became models for imitation.
Developing these capabilities required significant organizational investment, including long-term customer tracking, repeated communication on asset allocation, frequent management reviews, and detailed backend support. In an era of abundant industry growth, this intensive approach effectively scaled the business. Each additional relationship manager or increased customer touchpoint could boost Assets Under Management and customer loyalty. During the rapid expansion of wealth management, this system yielded high returns.
The bank's past success led the industry to believe that replicating its customer segmentation, wealth management, and retail organizational capabilities could create a distinct path for joint-stock banks, different from large state-owned banks or smaller city/rural commercial banks. However, as retail transformation became widespread across the industry, the early-mover advantage diminished marginally, while organizational complexity and costs did not decrease proportionally. The relationship between organizational efficiency and distribution is changing.
The banking sector has entered a new cycle. With declining interest rates, compressed net interest margins, completed wealth management product standardization, maturing client asset allocation views, and the diminishing returns of pure salesmanship, banks can no longer rely simply on 'working harder and longer' for the same marginal gains.
Over the past three years, nationwide joint-stock banks have faced operational pressures. The growth path built on scale expansion, customer base penetration, business innovation, and retail transformation can no longer deliver performance elasticity as it once did.
China Merchants Bank was long considered a benchmark because it proved joint-stock banks could build strong barriers in retail and wealth management. Its early adoption of digitalization in areas like credit cards, premium services, private banking, wealth management, mobile banking, and segmented retail client management underpinned its sustained high valuation and brand premium.
Compared to peers, China Merchants Bank established a clearer strategic focus: prioritizing deep retail, wealth management, and customer relationship mining over traditional corporate and interbank business. It emphasized customer AUM, cross-selling integrated financial products, and long-term loyalty over mere asset scale expansion.
Yet, this path is not cost-free. Retail banking is not a low-intensity, easily replicable business. It demands high organizational execution, human resource investment, and process coordination. Relationship managers must continually engage existing clients; wealth advisors need constant communication on asset allocation amid market fluctuations; private banking requires high-frequency interaction with high-net-worth clients; and front, middle, and back offices must collaborate closely on products, compliance, risk control, and system delivery.
During the growth era, this high-investment model paid off. Rapidly growing wealth management demand, acceptable customer acquisition costs, and strong cross-selling potential across credit cards, consumer loans, mortgages, wealth products, funds, and insurance meant human investment readily translated into AUM growth, fee income, and client stickiness.
Today, however, retail transformation is no longer a niche advantage but a common strategic move. The wealth management market is maturing, retail credit demand is weak, and the marginal returns on customer engagement are falling. The logic that 'more manpower and finer service' consistently drives growth is significantly weakening.
This context explains the strong reaction to the 'rarely off on time' remark. For China Merchants Bank, it highlights the cost structure of the retail banking model in this new cycle. The maintenance cost of the retail competitive edge is rising.
Despite high profit per employee exceeding 1.23 million yuan, employee satisfaction has not improved in tandem. High personnel efficiency has long been seen as a mark of organizational advancement in banking. But recently, with the sector entering a phase of low interest rates, low growth, and strong regulation, the meaning of efficiency is changing subtly.
For capital markets and management, high efficiency remains a key metric representing profitability and cost control. However, if this efficiency is built on longer hours, stricter assessments, and weaker salary growth, it raises sustainability concerns.
The pressure on joint-stock banks is not solely a uniform result of macroeconomic conditions but, more importantly, stems from a shift in their competitive positioning.
Based on aggregated data from 11 joint-stock banks that disclosed 2025 results, their total operating income declined for three consecutive years from 2023 to 2025. The 2025 aggregate revenue was less than 94% of the 2022 level. Net profit attributable to shareholders peaked in 2022 and had not recovered to that level by 2025.
While total assets of joint-stock banks grew in recent years, the annualized growth rate from 2022 to 2025 was only 5.4%, 3.8 percentage points lower than the overall commercial banking sector's growth. The simultaneous weakness in revenue, profit, and asset expansion signals more than a cyclical fluctuation; it indicates a change in the relative position of joint-stock banks within the competitive landscape.
In 2025, the net interest margin for joint-stock banks was 1.56%, down 43 basis points from 2022. Their non-performing loan formation rate was 1.21%, significantly higher than the 0.72% average for listed banks. Caught between risk resolution, provision constraints, and profit recovery, the 'middle ground' role of joint-stock banks is increasingly squeezed by pressures from the broader banking system and external environment.
Previously seen as the most dynamic bank category—more agile than large state-owned banks yet possessing greater scale and licenses than most city/rural commercial banks—this intermediate advantage is waning. Their market share is being eroded by large banks, while they struggle to anchor themselves using localized customer bases and regional strengths like smaller banks can.
A key change on the supply side is the direct competition with large state-owned banks. Joint-stock banks' branches are mostly in developed urban areas, serving larger corporate clients and urban residents, overlapping significantly with the customer base and geographic focus of large banks.
Previously, joint-stock banks found space in areas where large banks were unwilling, ineffective, or slow, leveraging flexibility, responsiveness, detailed service, and higher risk appetite. However, in an environment of weak loan demand and scarce prime customers, large banks—burdened with lending targets and offering more aggressive pricing—have now brought competition directly to the joint-stock banks' core turf.
Since 2022, the market share of large banks (by total assets) increased by 2 percentage points, while that of joint-stock banks fell by 2 percentage points. In contrast, the market share of city/rural commercial banks remained largely unchanged, indicating that joint-stock banks are bearing the brunt of this competitive shift.
Changes on the demand side are equally critical. Many joint-stock banks previously differentiated themselves through businesses that were difficult for large banks, involving non-standard assets, interbank activities, certain flexible credit arrangements, or even regulatory arbitrage disguised as innovation.
After stricter regulation began in 2017, such opportunities shrunk rapidly, compressing traditional differentiation methods. Subsequently, most joint-stock banks pivoted to retail, hoping to replicate China Merchants Bank's path and rebuild their growth curve through retail finance and wealth management.
However, retail credit demand has been weak recently, household leverage willingness has decreased, and risks in areas like credit cards and consumer loans have persisted. Retail banking is no longer a safe haven of low risk and high returns.
Furthermore, when a joint-stock bank's scale reaches several trillion or even approaches 10 trillion yuan, niche businesses increasingly fail to decisively drive the entire bank. One or two strong areas are insufficient to offset overall operational slowdown.
Joint-stock banks are also proactively contracting and optimizing. Exposure to real estate risks has affected corporate real estate, mortgages, and related supply chain finance. In the retail sector, risks continue to emerge in credit cards, consumer loans, and inclusive finance.
Faced with asset quality and provision pressures, many joint-stock banks are deliberately slowing asset expansion, focusing more on risk disposal, portfolio optimization, and balance sheet restructuring—prioritizing quality over quantity. This reflects not just an 'incapability' but a conscious correction of past expansion models.
Slower growth and risk resolution further weaken revenue and profit, compressing salary space and increasing performance pressure, creating a new cycle: to stabilize financials, banks need stronger execution; to maintain execution, front-line staff endure higher intensity; yet this intensity may not yield proportional income improvement.
The core dilemma for joint-stock banks is the weakening of their differentiated competitive ability. Large banks, despite comprehensive licenses, often suffer from inefficient internal coordination and resource mobilization. Smaller banks are constrained by limited licenses and capabilities, unable to offer complete solutions. Theoretically, joint-stock banks are in an ideal balanced position: possessing relatively complete licenses while retaining some operational flexibility.
The bank that can genuinely reshape organizational processes around customers, break down internal silos, and replace simple scale and price competition with integrated services is the one that may rebuild a differentiated advantage.
China Merchants Bank's greatest past achievement was systematizing retail banking from a concept. The future challenge is transitioning this system from a high human-input model to one characterized by high synergy, high professionalism, and high comprehensive financial service capability.
In essence, China Merchants Bank must answer several critical questions. How can customer relationship depth be maintained without increasing organizational strain? How can multiple licenses and products form a core integrated service capability amid weak retail credit and intensified wealth management competition? In a landscape where large banks are moving downstream and small banks are defending their turf, what spaces remain that are 'difficult for small banks and poorly executed by large banks'?
The old narrative of the 'middle bank' no longer holds automatically. The next breakthrough for joint-stock banks depends on whether they can genuinely build differentiated capabilities. This means sustaining profit quality and organizational vitality not through exhaustive operation, but by delivering greater value to customers, achieving higher internal efficiency, and providing more complete integrated financial services.
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