In a macroeconomic cycle where scale-driven beliefs have collapsed, China Merchants Bank has delivered results that prioritize certainty over high growth. In 2025, the bank's revenue saw a marginal increase of 0.01% year-on-year, while net profit attributable to shareholders rose by 1.21%. Although revenue growth remained barely positive, the performance lagged behind peers when compared horizontally—during the same period, SPD Bank recorded a 10.52% growth in net profit attributable to shareholders, and Bohai Bank achieved 4.61%.
However, superficial growth rates alone may not fully capture the resilience of the "retail banking leader." As an industry benchmark, China Merchants Bank's moderated growth resembles a high-stakes stress test report for the entire banking sector.
The banking industry currently faces a dual challenge: on one hand, interest margins are shrinking due to LPR cuts and repricing of existing mortgages, keeping credit pressure elevated on the balance sheet; on the other hand, a recovering equity market and a new wave of deposit maturities have revitalized wealth management and fund distribution businesses. The simultaneous contraction on-balance sheet and expansion off-balance sheet has drawn market attention to how well the retail banking leader can withstand macroeconomic pressures.
A detailed analysis of the financial report reveals clear cyclical impacts: weak credit demand and a historic drop in the proportion of demand deposits below 50%. Despite these challenges, the bank's net interest margin rebounded quarter-on-quarter in Q4, and its AUM (assets under management for retail customers) defied the trend to surpass 17 trillion yuan, reaching 17.08 trillion yuan.
At the earnings conference, Chairman Miao Jianmin acknowledged that the banking industry is grappling with "low interest rates, narrow spreads, and reduced fees." He emphasized that China Merchants Bank's strategy focuses on "strengthening advantages, addressing weaknesses, and maintaining leadership in wealth management." This direction signals the bank's shift from pursuing scale growth to prioritizing sustainable stability.
**Temporary Rebound in Interest Margins** The width of the deposit-loan spread determines the profitability of commercial banks. Market consensus has long held that China Merchants Bank's high ROE stems not from high asset-side pricing but from low liability-side costs. Historical data from 2021–2023 show that during the expansion phase, the bank's yield on interest-earning assets hovered between 3.7% and 3.9%, trailing Ping An Bank by over 60 basis points. The real differentiator lies in its liability structure: even during the intense deposit competition in 2022 and 2023, China Merchants Bank's cost of interest-bearing liabilities remained suppressed at 1.61% and 1.73%, significantly below the industry average of 2.2%–2.4%.
This low liability cost provides a dual advantage. First, it alleviates pressure on management to chase high-risk assets or lower-tier customers. Such restraint has built a natural risk barrier—in 2025, the bank's non-performing loan ratio stood at 0.94%, the best among listed joint-stock banks, outperforming Ping An Bank, Industrial Bank, and CITIC Bank by 11, 14, and 21 basis points, respectively.
While maintaining asset quality, China Merchants Bank must also address systemic industry-wide asset-side pressures. Influenced by early mortgage repayments and conservative consumer spending, the bank's credit card transaction volume fell by 7.62% year-on-year in 2025, while the yield on interest-earning assets dropped to 3.04%. The average yield on loans and advances declined by 57 basis points to 3.34%. However, as peers saw their interest margins shrink due to asset-side pressures, China Merchants Bank demonstrated a positive deviation. In 2025, its net interest margin stabilized at a high of 1.87%, maintaining a significant lead over competitors. Ping An Bank's net interest margin fell to 1.78%, while Industrial Bank's dropped to 1.71%. In Q4, China Merchants Bank's net interest margin rose by 3 basis points quarter-on-quarter to 1.86%, and its net interest spread increased by 4 basis points to 1.79%. This suggests the bank reached the bottom of its interest margin cycle earlier than peers.
The second advantage from its liability structure lies in the flexibility to reduce costs. A large base of low-cost core deposits allows the bank to cut high-interest liabilities without liquidity concerns. Under a balanced volume-price strategy, China Merchants Bank proactively reduced high-yield agreement deposits and scaled back large certificate of deposit issuances. In 2025, the average cost of interest-bearing liabilities dropped sharply by 38 basis points to 1.26%. In contrast, Ping An Bank, Industrial Bank, and CITIC Bank maintained liability costs at 1.67%, 1.74%, and 1.61%, respectively. This 38-basis-point reduction offset the decline in asset yields, supporting the Q4 margin rebound.
Vice President and Board Secretary Peng Jiawen confirmed this achievement at the earnings conference, noting that the full-year decline in net interest margin had narrowed significantly, with a quarter-on-quarter rebound in Q4. Looking ahead, Peng set a clear goal: "Strive to stabilize the interest margin in the second half of the year and maintain industry leadership."
The macro credit downturn has reshaped commercial banks' survival rules: the moat is no longer "high lending yields" but "low deposit costs." China Merchants Bank's confidence in cutting high-cost liabilities stems from its vast retail customer base and their substantial settlement funds. The key question is how the bank continues to attract massive low-cost funds without relying on high deposit rates. The answer lies in its core strength: wealth management.
**Leveraging the Retail Advantage** China Merchants Bank's resilience across cycles is embedded in its off-balance-sheet wealth management business. A stark contrast in data highlights this: in 2025, the bank's retail loan balance grew marginally by 2.15% to 3.65 trillion yuan, reflecting weak credit demand. Meanwhile, AUM—covering deposits, wealth management products, funds, and insurance—surged by 14.44% to 17.08 trillion yuan. This suggests that funds have not evaporated but have shifted from on-balance-sheet deposits to off-balance-sheet investments like mutual funds and insurance.
This shift also explains the bank's liability advantage: without competing on deposit rates, China Merchants Bank attracts low-cost demand deposits through its wealth management ecosystem. President Wang Liang revealed that wealth management revenue was the primary driver of the bank's top-line growth. As customers use the bank as their main wealth management platform, frequent transactions and liquidity buffers naturally accumulate low-cost settlement funds in demand accounts. The 15.22 trillion yuan AUM pool continuously supplies the balance sheet with inexpensive demand deposits.
Wealth management depth defines China Merchants Bank's uniqueness. It is one of the few joint-stock banks that does not rely on corporate credit "volume over price" to sustain revenue. As long as funds circulate within its system, the bank earns risk-free intermediary income, enabling a truly "light-capital" operation. Amid industry-wide pressure on intermediary business income, China Merchants Bank's wealth management fee and commission revenue surged by 21.39% to 26.711 billion yuan in 2025. Specifically, fund distribution income rose by 40.36% to 5.846 billion yuan, while wealth product distribution income increased by 18.98% to 9.347 billion yuan.
This growth is not accidental. During previous years of equity market weakness, the bank proactively reduced fees to defend market share. For instance, in 2024, it slashed fund purchase fees to as low as 10% of the standard rate. This long-term strategy of trading profit for scale has paid off as market conditions improved. In the second half of 2025, China Merchants Bank was the only institution, alongside Ant Group's fund platform, to join the "trillion-yuan club" in non-monetary fund assets under custody.
A deeper look into the 15.22 trillion yuan AUM reveals significant wealth concentration. By the end of 2025, the number of "Golden Sunflower and above" clients—with日均assets exceeding 500,000 yuan—grew by 13.29% to 5.9315 million. This group, representing less than 2.7% of the customer base, holds the majority of AUM, indicating high asset concentration. The data underscores that China Merchants Bank's core strength is deeply tied to affluent clients with strong risk resilience. Even as mass-market credit contracts, top-tier wealth continues to flow into the bank.
Thus, China Merchants Bank's transformation path is clear: it has evolved from a "heavy-capital model" reliant on balance sheet expansion to a "light-capital fortress" built on intermediary fees from fund沉淀.
**Inevitable Cyclical Scars** No financial institution is entirely immune to cycles. A closer look at the balance sheet reveals clear structural impacts from the macroeconomic environment. For instance, the foundation of the bank's low liability costs—demand deposits—is eroding. While total customer deposits exceeded 9.1 trillion yuan in 2025, the proportion of demand deposits fell below the 50% threshold to 49.4%, with retail demand deposits dropping to 47.94%. This means term deposits, which carry higher interest costs, now dominate the deposit base for the first time.
The decline in demand deposits reflects broader liquidity preferences, as households seek safety in long-term yields—a trend no single bank can reverse. If further LPR cuts pressure asset-side returns or if deposit termization continues, the low-cost demand deposit pool will dilute further, testing the sustainability of the Q4 margin rebound. Management has not回避ed this issue, projecting that net interest margin will remain under pressure in 2026 but pledging to maintain stability through active asset-liability management.
Beyond liabilities, the bank has deployed strategic resources to sustain reported profits and asset quality. While the NPL ratio held steady at 0.94% and net profit attributable to shareholders grew slightly by 1.21%, the provision coverage ratio dropped from 411.98% to 391.79% year-end, with credit impairment losses also reduced. This drawdown on reserves is linked to unresolved industry risks. Despite reducing exposure to property loans, the NPL ratio for the real estate sector remained high at 4.64%, indicating that legacy risks continue to consume resources.
Vice President Zhu Jiangtao addressed the provision coverage decline at the earnings conference, noting that while the ratio has decreased, it remains high at nearly 400%, reflecting "counter-cyclical management" to smooth profit fluctuations. He acknowledged that risks persist in certain key areas but stated they are "past the peak and overall controllable." Even after a 20-percentage-point annual decline, the 391.79% provision coverage ratio remains exceptionally high among listed banks, providing a substantial safety cushion. However, it also indicates that current profitability is more defense-oriented than expansion-driven.
Evaluating this financial report requires moving beyond linear expectations from the high-growth era. Today, China Merchants Bank's business foundation is built on a 17.08 trillion yuan AUM-driven light-capital barrier, precise liability cost management down to the basis point, and a robust 391% provision buffer. As President Wang Liang emphasized, a bank should be judged by its ability to "reduce volatility and navigate cycles." Facing macroeconomic gravity, China Merchants Bank no longer promises high-growth bursts but aims to be a less volatile, more stable institution. In an uncertain environment, "avoiding lagging behind, preventing crises, and ensuring a soft landing for the core business" has become a rare certainty valued by capital markets.
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