China’s big banks post flat 2025 profit on margin squeeze

Published Fri, Mar 27, 2026 · 06:39 PM

[BEIJING] China’s largest state-owned lenders reported flat earnings for 2025, as the industry grapples with government mandates to support a cooling economy and a protracted squeeze on profit margins.

Industrial & Commercial Bank of China, the world’s largest lender by assets, said net income rose 0.7 per cent to 368.6 billion yuan (S$68.6 billion) last year, according to a stock exchange filing on Friday (Mar 27). Profit at China Construction Bank gained 1 per cent, while Bank of Communications posted a 2.2 per cent increase.

The lenders continued to suffer deteriorating lending margins and rising loan impairments. Stagnant earnings have become the norm as Beijing calls on state banks to provide national service to backstop the economy with cheap loans and forbearance.

The headwinds have forced the banks to navigate a tightening vice of record-low net interest margins, while simultaneously managing deteriorating asset quality. The sustained strain prompted authorities in March to pledge the issuance of special sovereign bonds to recapitalise the largest banks, marking a critical effort to fortify the US$69 trillion financial system.

While ICBC’s bad debt ratio narrowed, the mega bank’s allowances for loan impairments rose 4.5 per cent to 852 billion yuan in 2025. 

At an earnings conference on Friday, ICBC President Liu Jun said he sees a “a sign of stabilisation” after the bank’s net interest margin suffered a smaller contraction in the past few quarters. 

Despite the pressure, the industry remains profitable in absolute terms. Chinese banks booked a combined profit of 2.38 trillion yuan in 2025, an 2.3 per cent increase from the prior year, even as margins hit historic lows.

Analysts suggest the worst may be over. In a January note, Morgan Stanley analysts led by Richard Xu predicted that margins will bottom out in the first half of 2026 before rebounding. This recovery is expected to be driven by Beijing’s pivot away from aggressive credit expansion in favour of more disciplined, risk-based loan pricing.

Bank of Communications Vice President Zhou Wanfu expects that interest expenses on deposits will continue to decline this year as the volume of maturing deposits increases significantly, particularly in the first quarter. Supported by the deposit repricing, the bank’s net interest margin is expected to stabilise and trend positively over the full year, he said at a presentation on Friday. 

Bank of China and Agricultural Bank of China are scheduled to round out the earnings season when they report results on Monday. BLOOMBERG