The decade-long surge in commercial bank retail operations is hitting an invisible wall. Recent central bank data for the first quarter of 2026 reveals a stark contrast: while corporate and institutional loans increased by 8.6 trillion yuan, household loans saw a mere increase of 296.7 billion yuan. Within this less-than-300-billion-yuan household increment, a clear signal of internal structural contraction is evident, with short-term household loans experiencing a substantial net decrease of 164 billion yuan. During recent earnings calls, executives from several banks emphasized that developing corporate banking has become a common strategic choice for commercial banks. This divergence between corporate expansion and retail stagnation points to a fundamental shift in the underlying asset logic of the banking sector. The slowdown in mortgage loan growth, once considered a safety cushion, has disrupted the traditional asset allocation rhythm of banks. Unsecured pure credit loans, lacking collateral support, have stalled under the pressure of narrowing interest margins and rising risk exposure, making the old model of using high yields to cover bad debts unsustainable. With the breakdown of this pricing cycle, the banking industry has entered a market-forced period of stock adjustment. The arduous restructuring of balance sheets is becoming a cyclical challenge the entire sector must overcome.
The contraction of the safety cushion is evident. Retail banking was once a finely tuned profit engine for commercial banks, with a foundation built on personal housing mortgages, consumer and business loans, and credit card balances, all supporting balance sheet profitability. However, this previously well-coordinated machine is now facing systemic resistance. As the longest-duration, lowest-default-rate high-quality asset for banks, personal housing loans provided not only stable interest margins over the past decade but also, due to low capital consumption and risk losses, served as the deepest safety cushion for retail banking. Analysis of the past decade's data shows that from 2016 to 2022, the one-sided rise in mortgage scale saw the six major state-owned banks—Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, and Postal Savings Bank of China—achieve a compound annual growth rate (CAGR) of 9.64%. However, in 2023, this established expansion trend came to an abrupt halt. Over the subsequent three years, the CAGR for this asset reversed to -1.56%. The contraction slope continued to steepen in 2025, with a year-on-year decline reaching 2.47%, a widening of 42 basis points from the previous year. The combined residential loan balance of the six major banks, totaling 32.9 trillion yuan, has retreated to levels seen before 2021.
The dial continues to turn back. In the first quarter of 2026, the weighted average interest rate for newly issued commercial personal housing loans nationwide fell to a low of 3.06%. However, the RMBS conditional prepayment rate index, reflecting prepayment activity, remained elevated, indicating that the gap from early repayments has not been filled by new demand. The stagnation in mortgage scale has disrupted banks' originally constructed asset formation. With the supply of low-risk foundational assets in crisis, vast credit quotas and internal performance indicators must find new outlets, rapidly shifting pressure to the personal consumption and business loan sectors.
The reversal of supply and demand forces is reflected in product yield curves. Between 2021 and 2025, the average yield on personal loans at three joint-stock banks with a strong retail focus—Ping An Bank, Industrial Bank, and China Merchants Bank—fell by 270, 206, and 161 basis points, respectively, dropping to 4.79%, 4.16%, and 3.94%. After the start of 2026, banks generally adopted a combination strategy of lowering rates, increasing quotas, and extending terms to achieve a strong start. For some joint-stock banks, "flash loans" combined with interest subsidy coupons resulted in effective annualized rates as low as 2.58%, even inverting compared to the 3.06% rate for newly issued housing loans during the same period. Falling below the 3% pricing range represents a homogenized, close-quarters battle amid an asset shortage. In the gap of continuously compressed interest margins, some borrowers have even identified arbitrage opportunities, using low-interest business loans to refinance earlier, higher-interest存量 mortgages, further intensifying the reevaluation of returns on banks' underlying assets.
More critically, the fierce competition on the supply side has seen little response from the demand side. In the first quarter, China's total retail sales of consumer goods recorded a year-on-year increase of 2.4%, yet households' willingness to expand leverage remains weak. The net decrease of 164 billion yuan in short-term household loans marked the first quarterly negative growth in several years. Both stagnant scale and declining prices are simultaneously impacting banks' traditional credit models.
The old credit model of high yields covering high risks is breaking down. In the past, unsecured credit loans were a赔率 game where high returns covered high risks; as long as yields outpaced bad debts, the pricing model closed the loop. However, facing a dual assault of volume and price declines alongside rising risks, this logic is gradually failing. Among all unsecured credit assets, credit cards serve as the most sensitive indicator for detecting this round of risk. Taking China CITIC Bank as an example, during the expansion period from 2016 to 2022, its cumulative card issuance grew from 37.38 million to 106.6 million, with a CAGR nearing 20%. However, after 2023, its card issuance growth rate gradually declined, narrowing to 4.88% by 2025. The sensation is more acute for the large state-owned banks. From 2023 to 2025, Bank of Communications saw a net reduction of over 11 million cards issued, while ICBC and CCB also experienced contractions of several million cards.
Arriving simultaneously with the peak in scale is the accelerating exposure of存量 risks. Taking Ping An Bank as an example: after its retail reform in 2016, the bank once used high pricing on products like the Elite Platinum Card to boost interest margins for a breakthrough. Not only did its net interest margin lead among joint-stock banks, but its profit growth also exceeded 25% from 2021 to 2022. As the macroeconomic chill set in, Ping An Bank's credit card non-performing loan (NPL) ratio soared to 2.77% in 2023 after missing the adjustment window. The new management adjusted high-yield credit businesses with a "hard landing" approach, causing the profit contribution rate of its retail division to plummet from over 70% at its peak in 2019 to 0.6% in 2024. While the ledgers of other banks may not be as dramatic as Ping An Bank's, they are not immune to the tide of the cycle. Risk exposure in credit assets has significant滞后性; default risks埋下 earlier erupt when scale stagnates and old debts cannot be diluted by new ones, inevitably leading to a collapse in profitability and asset quality.
With both mortgages and credit cards decelerating, personal business loans have taken up the baton to支撑 retail scale. From 2020 to 2024, business loans maintained an annual expansion rate of over 20%. By the end of the fourth quarter of 2025, household sector business loans grew 4.0% year-on-year, becoming the only remaining category of retail credit with positive growth. However, as a credit extension lacking collateral, business loans have not escaped the curse of the old模式. Since many small and micro business owners cannot provide effective collateral for their operations, banks cannot grasp the真实经营 situation of these enterprises. The low interest rates resulting from price wars may很可能无法 cover the funding costs, operational expenses, and bad debts associated with business loans. Furthermore, facing a pressured real economy, some borrowers have异化 credit into fund shuffling to repay other loans with new debt. Industry sources indicate that among current new business loan customers at various banks, many borrowers are not using funds for actual operational周转 but are instead using low-interest ammunition from Bank A to repay存量旧债 at Bank B. This inter-bank fund transfer and空转掩盖 bad debts in the short term but could, over a longer周期, turn business loans into a massive不良资产包袱 of passing the parcel.
Today's business loans face a situation similar to credit cards—a misalignment between immediate pricing and滞后 risks. Interest rates falling below 3% affect current net interest margins, but the真实 exposure of bad debts has a 12–18 month lag. This意味着 the current low rates may很可能无法 cover future risk exposures. Zeng Gang, Director of the Shanghai Finance and Development Laboratory,指出 that the current credit market is exhibiting highly anomalous price declines and volume收缩. "According to the traditional credit pricing framework, price declines should stimulate demand释放, creating a共振 of volume and price, but the current situation is恰恰相反," Zeng noted. He pointed out that disorderly competition on the supply side has nearly eliminated risk premiums, while structural萎缩 on the demand side means that近乎 "白菜价" credit cannot撬动 effective demand. The弹性空间 for risk pricing has been highly compressed.
Zeng believes that the old pricing闭环, premised on scale expansion and using high yields as risk compensation, is facing structural破裂, not just cyclical temporary压力. To maintain the appearance of平稳 asset quality, banks have had to pay a high price for write-offs. In the first quarter of 2026, the industry's apparent NPL ratio微降 by 1 basis point, but this was still建立在 on the accelerated write-offs of personal不良 loans. Massive write-offs持续吞噬 current profits and provision resources, proving the path of diluting bad debts by expanding scale to be financially伪.
With the old profit engine gradually stalling, commercial banks have been forced into a残酷 resource reallocation倒逼 by the market. At the table of存量搏杀, commercial banks with different禀赋 are heading down截然不同的分岔路. Many joint-stock banks once known for their retail prowess have chosen to retreat. From 2023 to 2025, Ping An Bank's retail loan growth rate bottomed out from -3.4% to -10.6% before narrowing to -2.3%. China Everbright Bank recorded negative growth for three consecutive years, and Industrial Bank's retail端 also recorded a -3.41% contraction in 2025. In contrast, the corporate loans of listed banks maintained稳健扩张, even被迫 becoming the main engine for scale growth. This contraction does not stem from主动进攻 but is a防守倒逼 by bad debts. Zeng Gang指出 that some joint-stock banks had already充分暴露 their peak retail不良 in the previous cycle. Turning to corporate business sacrifices short-term high yields in exchange for阶段性修复 of asset quality—a止血手术 of trading time for space.
In the缝隙 left by the retreat of joint-stock banks, the large state-owned banks are launching a收割凭借 their体量优势. Over the past five years, the cumulative loan growth of Agricultural Bank of China and Industrial and Commercial Bank of China exceeded 50% and 40%, respectively. While scaling up狂飙, their NPL ratios in the first quarter of 2026 remained at safe levels of 1.25% and 1.31%. In this new structural大调整, although the retail growth rates of the six major banks are generally不及 their corporate growth, compared to the全面缩表 of joint-stock banks, they have稳稳守住 the底线 of positive growth. The底牌 for the大行收割 is their低廉的负债成本.凭借 ample low-cost funds, state-owned banks can承受 asset pricing as low as 2.3% in下沉 markets,持续渗透 the腹地 of joint-stock banks. However, Zeng Gang提示 that the大行 "收割" strategy is not without隐忧.持续的下沉渗透 will accelerate the downward shift of the industry's overall pricing中枢, potentially最终 forming a系统性压制 on the entire banking sector's interest margin system. Simultaneously, Zeng指出 that without复苏 on the demand side, the体量碾压 of large banks and the资产退守 of中小 banks are merely a位置互换 in the存量博弈, not真正的增量.
Beyond the博弈 between state-owned and joint-stock banks, city and rural commercial banks are also accelerating. For instance, Bank of Nanjing and Bank of Ningbo, which have高速扩表 in recent years, have both收缩 their防御重心 to consumer loans and微型经营贷, maintaining core retail asset扩张 over five years while also controlling NPL ratios at favorable levels. Lou Feipeng, a researcher at Postal Savings Bank of China,指出 that the护城河 of city commercial banks in the Jiangsu-Zhejiang region lies in their极高的区域集中度 and扁平的决策链条. Relying on long-accumulated非标准化软信息掌控 of local small and micro enterprises, these banks have established防御阵地 in下沉 markets characterized by小额分散 that cannot be轻易击穿 by price alone, forming a分层共存的局部格局. Lou believes this本地化优势 has持续性. Given the明确差异化定位 of city commercial banks, the future industry格局 is more likely to be "分层共存" than a zero-sum博弈.
After years of internal卷, data from the first quarter of 2026 finally释放出微弱的企稳信号. The entire commercial banking industry achieved a cumulative net profit微增 of 0.5% year-on-year, and the NPL ratio阶段性企稳 at 1.59%. With the宏观经济持续恢复 and improvement in居民收入预期, Lou Feipeng believes that future pressure from retail credit risk exposure will明显降低. The optimization of负债成本 resulting from multiple previous存款利率下调 is beginning to显现. The边际企稳 of net interest margins has争取了 a喘息窗口 for the banking industry's adjustment.
This does not意味着危机解除. Zeng Gang指出 that as the scale expansion driven by high-yield retail reaches its end, the核心命题 for commercial banks in重构资产负债表必然 shifts from "做大分子" to "做优结构". The首要发力点 lies in the回归 to relationship banking. Zeng指出 that banks must重建 a customer-centric comprehensive service capability,打包输出 services like credit, settlement, and wealth management,锁定优质客户 through粘性而非价格竞争. Secondly, the资产端 must重新锚定 to真实的经济活动. "There exists大量资金空转 in the credit system, which not only压低了 the实际效率 of social financing but also造成 the隐性风险积累 of银行资产质量," Zeng emphasized. He stated that the毛细血管 of industrial chain finance should be打通, embedding funds into真实交易场景 through supply chain finance and科技信贷 to根本上减少空转.
Lou Feipeng further补充,指出 that banks need to强化场景化风控, establishing a三位一体核查机制 of "资料审查—交易验证—资金匹配". This can be achieved through API直连商户 to实现资金闭环 and using AI for实时监测 of资金流向. Simultaneously,差异化定价 should be实施, based on大数据精细化分层 to实现风险收益匹配. Finally,主动管理 of the负债端 will become a关键变量 in the new period. Zeng believes that趁着 the window period where high-interest存款陆续到期 and net interest margins边际企稳, how to完成 the optimization of负债结构 will be the分水岭 distinguishing优质银行 from平庸银行 in the next stage.
Regardless, the狂飙时代 of blindly relying on high-yield products to achieve scale跃升 has落幕. Shifting from scale priority to克制的资产结构优化, though伴随阵痛, is the必然选择 for the long-term development of commercial banks.
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