Amid a prolonged period of narrowing net interest margins for banks, financial performance across the sector is under strain. China Merchants Bank, often referred to as the "King of Retail Banking," is confronting substantial challenges within its flagship retail division. Under this pressure, the institution is compelled to explore new avenues for revenue generation. Recent remarks by Chairman Miao Jianmin during the bank's 2025 results presentation, suggesting that employees rarely leave work on time, have drawn significant public attention. In context, however, the chairman's comments were intended to highlight the bank's staff's dedication to client service. When questioned about the bank's competitive advantages in a low-interest-rate environment, Chairman Miao identified the true "moat" as the internalization of a "client-centric" philosophy into the corporate culture, which is then reflected in employees' daily conduct. He cited examples such as staff working beyond standard hours and the board office preparing extensive investor communication materials within two days, asserting that this cultural cohesion and professionalism are the core competencies enabling the bank to outperform its peers. While corporate culture is vital, the capital market ultimately judges based on performance. The 2025 annual report, disclosed on March 27th, revealed that China Merchants Bank achieved operating revenue of 337.532 billion yuan, a marginal increase of 0.01% year-on-year, and a net profit of 150.181 billion yuan, up 1.21%. The bank's renowned retail business is facing significant headwinds. Key retail metrics showed weakness: revenue from retail financial operations fell by 3.74%, net retail interest income decreased by 5.74%, and credit card transaction volume declined by 7.62%. The non-performing loan ratio for credit cards was the highest among all retail lending segments. This situation forces the "retail leader" to seek new profit models. The performance of China's banking sector has been a focal point. In the 2025 fiscal year, many major banks showed a clear recovery. The six largest state-owned banks all reported growth in both revenue and net profit attributable to shareholders. Among joint-stock banks, performance was mixed. Of the nine listed joint-stock banks, three achieved dual growth in revenue and profit, including China Merchants Bank with its slight increases. The bank's management described 2025 as an "extraordinary year," emphasizing successful navigation of low-interest-rate challenges and stable progress in key metrics. However, a longer-term view reveals a deceleration from double-digit growth in revenue and profit in 2021 to low single-digit or even negative growth in subsequent years, culminating in the near-flat revenue growth for 2025. A primary reason for this slowdown is the diminished performance of the once-dominant retail business. Pre-tax profit from retail financial operations in 2025 was 87.417 billion yuan, down 0.65% year-on-year. Retail financial revenue was 1.85293 trillion yuan, a decrease of 3.74%, accounting for 61.89% of the bank's total operating revenue. President Wang Liang acknowledged the challenges facing the retail business, including a sharp decline in retail credit growth and impacts on the credit card segment from market changes. Data shows that while the bank's retail loan balance grew by 2.15% to approximately 3.7 trillion yuan, retail customer deposits surged by 11.49% to 4.3 trillion yuan. This divergence, where deposit growth significantly outpaced loan growth, contributed to the 5.74% decline in net retail interest income. In the credit card business, China Merchants Bank remains a major player, still attracting new users in a contracting market where the total number of credit cards in circulation nationally decreased. The bank's circulating credit cards and active cardholder numbers both increased by the end of 2025. However, this user growth did not translate into higher transaction volumes or income. Credit card transaction value fell by 7.62%, with interest income and non-interest income from cards declining by 7.30% and 15.73%, respectively. Furthermore, the credit card NPL ratio stood at 1.74%, the highest within the retail loan portfolio, and credit cards constituted nearly half of the total 62.4 billion yuan in overdue retail loans. The underperformance of the retail segment also dragged down the bank's overall net interest margin (NIM), which fell by 11 basis points to 1.87% for the full year 2025. A quarterly breakdown, however, shows signs of stabilization, with the NIM dropping through the first three quarters before rebounding to 1.86% in the fourth quarter. Vice President Peng Jiawen attributed this recovery to proactive adjustments, including increasing the proportion of higher-yielding credit assets and optimizing the asset portfolio. Looking ahead to 2026, President Wang Liang expects the NIM to stabilize with a slight downward trend, though the rate of decline is anticipated to narrow. He cited persistent pressures from central bank rate cuts, insufficient credit demand, and intense competition leading to pricing pressures. With profitability from traditional retail lending becoming more challenging, finding new growth engines is a top priority for China Merchants Bank. In 2025, non-interest net income decreased by 3.38% to 121.939 billion yuan. Within this category, two segments performed well: investment income surged 23.28% to 36.837 billion yuan, primarily from bond and non-monetary fund investments, and net fee and commission income grew by 4.39% to 75.258 billion yuan. An investment analyst noted that the bank's extensive retail customer base, built over years, is now a critical asset. By deeply engaging this vast clientele, China Merchants Bank is focusing on wealth management services, including the distribution of wealth management products, funds, and insurance. The bank's strategy involves strengthening customer acquisition, tapping into the growth potential of high-quality customer segments, and enhancing service systems. By the end of 2025, the bank served 224 million retail customers, an increase of 6.67%. Notably, the number of "Golden Sunflower" and above clients—those with average monthly total assets exceeding 500,000 yuan—grew by 13.29% to 5.9315 million. Simultaneously, the total assets under management (AUM) for retail clients surpassed 17 trillion yuan, securing the bank's top position among joint-stock banks and growing by 14.44% year-on-year. This massive pool of assets within the bank's ecosystem provides fertile ground for wealth management operations. President Wang confirmed the positive contribution of wealth management, stating that its rapid growth helped offset declines in the bank's overall comprehensive income last year. He highlighted that income from distributing wealth management products grew by approximately 19%, while fund distribution income surged about 40%. Addressing market concerns about a significant volume of time deposits maturing in 2026, Vice President Peng Jiawen stated that while the amount maturing at China Merchants Bank in 2025 was slightly higher than in previous years, it remained within a normal range. He emphasized that if depositors shift funds to wealth management products or public funds, the bank aims to retain these assets within its system through quality service. Even if funds flow into capital markets, the resulting settlements often remain as corporate deposits. Peng views potential deposit outflows as a market realignment opportunity, allowing the bank to leverage its core strengths to capture a larger share of clients and assets. The aforementioned analyst concurred, noting that successful wealth management requires both capital and expertise. China Merchants Bank, with its strong retail foundation, has earned high levels of customer trust and loyalty, and possesses experience in guiding clients toward optimal asset allocation. For instance, relationship managers proactively inform clients about product availability, aiding in financial planning. A successful transition from deposits to wealth management would not only reduce interest expenses but also generate higher fee income from financial products, thereby boosting overall profitability. A report from Donghai Securities commented on the bank's strategic pivot, noting that despite volatility in intermediate business income due to market fluctuations and regulatory changes, this income stream remains central to the retail strategy. The bank's extensive customer base, product ecosystem, distribution channels, and professional service constitute a formidable competitive barrier. With its superior resilience in non-interest income, wealth management is poised to re-emerge as a key earnings driver. The report also highlighted that China Merchants Bank maintains a leading dividend payout ratio within the industry, offering a highly competitive dividend yield.
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