(March 30): China’s leading state-owned lenders reported anaemic annual results for 2025, as a state-mandated push to support a flagging economy continued to erode industry profitability.
Agricultural Bank of China Ltd (AgBank) said Monday in a stock exchange filing that net income rose 3.2% to 291 billion yuan (US$42.1 billion or $54.3 billion) last year, while Bank of China Ltd (BOC) posted a more modest 2.2% increase. These figures align with Friday’s disclosures from peers Industrial & Commercial Bank of China Ltd (ICBC) and China Construction Bank Corp, both of which saw similar constraints.
While both AgBank and BOC reported improvements in their headline non-performing loan ratios — helped by a slight year-over-year dip in credit impairment losses — the underlying data reveals pockets of stress. Both banks saw a deterioration in asset quality within their retail portfolios, specifically in credit cards.
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 ($88.99 trillion) financial system.
Despite the pressure, the industry remains profitable in absolute terms. Chinese banks booked a combined profit of 2.38 trillion yuan in 2025, a 2.3% increase from the prior year, even as margins hit historic lows.
Credit risk remains the key concern for ICBC, according to Bloomberg Intelligence analyst Francis Chan, with earnings growth constrained by higher provisions and with overdue loans worsening despite heavy write-offs and disposals.
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While ICBC’s bad debt ratio narrowed, the mega bank’s allowances for loan impairments rose 4.5% to 852 billion yuan in 2025. At an earnings conference on Friday, ICBC president Liu Jun said he sees “a sign of stabilisation” after the bank’s net interest margin suffered a smaller contraction in the past few quarters.
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.
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