The twin pillars of cost control on liabilities and industrial finance form a unified logic for Industrial Bank Co.,Ltd. (the bank's operational strategy).
From July 20 to 22, the bank held its 2026 semi-annual work conference in Fuzhou, where Chairman Lv Jiajin delivered a speech and President Chen Xinjian released the bank's full operational analysis report. The meeting reviewed the first half's performance against the initial "seeking stability while advancing, improving quality and efficiency" theme, placing two key business lines at the forefront of the second half's priorities: first, continuously expanding and lowering the cost of liability business, and second, treating industrial finance as a comprehensive upgrade of the bank's business model and development philosophy. The former bears the goal of operational "stability," while the latter drives business "progress," corresponding to the two sides of the bank's balance sheet.
In the fourth quarter of 2025, the commercial banking sector's net interest margin (NIM) stood at 1.42%, with industry profitability under persistent pressure. In the first quarter of 2026, Industrial Bank Co.,Ltd. reported operating revenue of 55.1 billion yuan, down 1.1% year-on-year, making it the only top-10 joint-stock bank with negative revenue growth. Its NIM was 1.62%, a decline of 18 basis points year-on-year. Total assets grew 6.1% year-on-year, but net interest income shrank by 2.1%, indicating that asset expansion did not translate into interest income growth. Structural data explains this trend: in the first quarter, interbank assets rose to 10.9% of total assets, a decade-high, while interbank liabilities accounted for 29% of total liabilities. Full-year 2025 data shows the bank's deposit cost rate was 1.65%, and its interbank liability cost rate was 1.76%, with interbank funding costs higher than regular deposits. The continuous expansion of high-cost liabilities, matched with low-yielding interbank assets, has persistently compressed the NIM.
Against this backdrop, Industrial Bank Co.,Ltd. has prioritized the expansion and cost reduction of liability business as its first key task for the second half of the year. The conference emphasized strengthening proactive asset-liability management, concurrently advancing the reduction of liability costs, adjusting their structure, and stabilizing their scale, relying on low-cost liabilities to support the bank's revenue and profit stability. Chairman Lv Jiajin previously disclosed the complete implementation path at the earnings call, which involves leveraging the "Netting Project" to build a scenario-based ecosystem, embedding financial products into the full operational flow of enterprises, encouraging settlement funds to remain within the bank's closed loop, and increasing low-cost settlement deposits. The bank's head of the Planning and Finance Department, Lin Shu, concurrently supplemented the supporting strategy, which includes continuously expanding corporate settlement deposits and adjusting deposit tenors and customer tier structures. In 2025, the bank's deposit cost rate was 1.65%, down 33 basis points year-on-year, with the corporate deposit cost rate also falling 34 basis points. Retail demand deposits grew 13.54% year-on-year, with an average cost of only 0.08%. In the first quarter of 2026, the bank's deposit cost rate further declined to 1.44%, a 35-basis-point drop year-on-year, indicating the continued release of cost reduction effects on the liability side.
The bank's low-cost settlement deposits primarily come from the daily operational cash flows of corporate industrial clients. However, relying solely on cost compression on the liability side is insufficient to offset the persistently declining yields on the asset side, making industrial finance a necessary incremental solution. On the other hand, Industrial Bank Co.,Ltd. is positioning industrial finance as a strategic direction for business breakthroughs, leveraging deep industry chain operations to obtain asset pricing premiums and offset NIM pressures. Chairman Lv Jiajin previously outlined a comprehensive implementation framework at the earnings call, which involves building a tiered customer system around 21 key industries, establishing 1,800 industrial customer profiles, 2,023 core leading enterprises, and a target database of 175,000 upstream and downstream supporting enterprises. The plan for 2026 includes adding 200 new industrial profiles and 300 core chain-leading customers. The implementation is structured into three layers: deepening engagement with leading enterprises in the industry chain, breaking down barriers between corporate, private, corporate banking, and asset management businesses, and leveraging industrial data to build a full-chain digital service. The semi-annual meeting supplemented implementation guidance, using "digitalization, greening, internationalization, comprehensive solutions, and ecosystem building" (the "Five Orientations") as implementation paths, supported by four enabling mechanisms: research, risk, technology, and collaboration. Multiple industry chains have formed standardized implementation cases: the Wuxi branch covers the entire chain of integrated circuit materials, manufacturing, and packaging and testing. By the end of April 2026, it had extended credit of 16.2 billion yuan to over 60 chain enterprises, with actual financing disbursement exceeding 6 billion yuan. Business actions include partnering with Industrial Bank Co.,Ltd.'s investment arm to complete a market-oriented debt-to-equity swap for a subsidiary of Yak Technology, facilitating reverse factoring for over 50 upstream suppliers, and providing hundreds of millions of yuan in medium- to long-term loans to a packaging and testing leader to support advanced packaging R&D. The Changsha branch focuses on the biopharmaceutical sector, approving a 300-million-yuan, seven-year special credit line for a specialized and new "little giant" enterprise, covering the full lifecycle funding needs of new drug R&D, pilot testing, and mass production. The Xi'an branch executed Shaanxi Province's first coal-to-chemical transition finance loan, approving a 200-million-yuan credit line to Jingyi Chemical, with an initial drawdown of 123 million yuan for the company's low-carbon technology upgrade project.
Data from Industrial Bank Co.,Ltd.'s 2025 financials clearly shows the bank's tilt toward industrial credit: its green loan balance reached 1.11 trillion yuan, up 19.05% year-on-year; technology finance loan balance stood at 1.12 trillion yuan, up 18.47% year-on-year; and medium- to long-term manufacturing loans grew 14.91%, with all three industrial loan growth rates exceeding the bank's overall loan average growth rate. Industrial finance is not limited to traditional credit disbursement; it leverages industry chain scenarios to uncover comprehensive financial needs, with enterprise operational cash flows and payroll funds simultaneously settling as low-cost demand deposits, creating a two-way linkage between assets and liabilities.
At a deeper level, liability cost control and industrial finance form the two sides of the same operational logic for Industrial Bank Co.,Ltd. The "Netting Project" accumulates low-cost settlement funds to lower interest costs, while industrial finance ensures precise deployment to capture asset-side pricing returns, with the two business lines advancing in tandem to create a closed loop. In 2025, the bank's full-year revenue was 212.741 billion yuan, a slight increase of 0.24% year-on-year; net profit attributable to shareholders was 77.469 billion yuan, up 0.34% year-on-year, marking two consecutive years of growth in both revenue and net profit. The full-year NIM decline narrowed to 11 basis points, as the effect of lower liability-side costs offsetting the decline in asset returns continued to show. Today, Industrial Bank Co.,Ltd.'s total assets have exceeded 11 trillion yuan, marking the end of the era where banks relied on asset expansion to drive profitability. In an environment where the industry's NIM remains below 1.7%, the transformation path outlined at this semi-annual meeting is fine-grained liability cost control and expanding asset return space through industrial finance. The effectiveness of these two main lines can be continuously observed through two key metrics: the stabilization of asset yields driven by industrial finance disbursement, and the continued accumulation of low-cost deposits from industry chain scenarios. Only when both metrics improve simultaneously can the bank balance scale and efficiency. Currently, many joint-stock banks are facing the operational contradiction of asset expansion without corresponding income growth. Industrial Bank Co.,Ltd.'s asset-liability two-way coordinated transformation plan offers valuable industry observation points. Subsequent changes in the bank's industrial credit yield and demand deposit ratio will provide a direct measure of the model's implementation effectiveness.
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