The six major banks compete in net interest margin, with Postal Savings Bank of China at 1.66%, still ranking first.

Ask AI · What’s the secret behind Postal Savings Bank of China’s leading net interest margin?

This report (chinatimes.net.cn) by Lu Mengxue, Beijing

On March 30, the financial reports of all six state-owned banks for 2025 were released. As the “anchor” of the banking industry, against the backdrop of these six banks delivering benefits to the real economy, in 2025 they collectively recorded operating income of RMB 3.60 trillion and total net profit of over RMB 1.44 trillion.

As a core indicator for measuring banks’ profitability, the six banks’ net interest margin in 2025 showed a distinctive pattern of marginal convergence in the decline and stabilization on a quarter-over-quarter basis. Although they were still in a downward channel, through a combination of measures—including optimization of credit structure, more fine-tuned management of funding costs, and expansion of non-interest income—the downward momentum in net interest margins has clearly eased.

Looking ahead to 2026, as high-yield time deposits mature in a concentrated wave, repricing of existing loans approaches its end, and the cost of interbank liabilities continues to trend down, the six banks generally expect that the year-over-year decline in the industry’s net interest margin in 2026 will narrow significantly.

The decline in net interest margin is gradually narrowing, and signs of stabilization are becoming clear

According to the financial reports, in 2025, the six banks achieved “double positive growth” in both operating income and net profits. However, under the influence of factors such as the reduction in the loan market quoted rate (LPR), increased competition in repricing existing loans, and intensified deposit competition, the six banks’ net interest margins still trended downward.

More specifically, Postal Savings Bank of China maintained a relatively clear advantage, with its net interest margin at 1.66%, the highest among the six banks. China Construction Bank’s net interest margin was 1.34%; the net interest margins of the other banks were generally below 1.3%, namely Agricultural Bank of China at 1.28%, Industrial and Commercial Bank of China at 1.28%, Bank of China at 1.26%, and Bank of Communications at 1.20%.

In terms of the degree of decline, the net interest margins of the six banks all fell compared with 2024, among which Bank of Communications narrowed by 7 basis points, the smallest decline. Worth noting is that although they continued to narrow, compared with the year-over-year decline in 2024, the six banks’ overall net interest margin decline in 2025 has already begun to converge. Specifically, the net interest margin decline for Bank of China and Industrial and Commercial Bank of China was 5 basis points less than their decline in 2024; Agricultural Bank of China and China Construction Bank each fell 4 basis points and 2 basis points less, respectively, than in 2024.

In fact, starting in the second half of 2025, the market had developed some expectations that the net interest margins of the six banks would stabilize. Based on composite year-end data, the net interest margins of Industrial and Commercial Bank of China and Bank of Communications were both unchanged from the end of the third quarter of 2025. Meanwhile, the decline in the net interest margins of China Construction Bank and Postal Savings Bank of China at year-end 2025 was also limited to between 0.01 and 0.02 percentage points compared with the end of the third quarter of 2025, making the signal of stabilization on a quarter-over-quarter basis clearer.

Yuan Shuai, co-founder and initiator of the New Zhixin (new quality productive forces) matchmaking salon, analyzed for reporters from the Huaxia Times that a narrowing net interest margin would compress banks’ space for interest income. If a given bank’s net interest margin decline is significant and it cannot make up for it through other businesses, its operating revenue would be affected.

Against the backdrop of a slowing decline in net interest margin, the six banks’ year-over-year decline in net interest income also improved in 2025. Among them, Bank of Communications’ net interest income continued to grow, up 1.91% year over year. The net interest margin declines for Industrial and Commercial Bank of China, China Construction Bank, and Bank of China narrowed by 3.12, 7.54, and 5.76 percentage points, respectively, compared with 2024.

Offsetting the pressure from net interest margin narrowing

The marginal improvement in net interest margin is not coincidental. Based on the financial reports and earnings call remarks, tightening management on both the asset side and the liability side, stabilizing the basic plate of net interest income, and increasing the contribution of non-interest income are the core logic by which the six banks offset the pressure on net interest margins.

At an earnings release conference, Sheng Liurong, Chief Financial Officer of China Construction Bank, said the reasons for the narrowing of China Construction Bank’s net interest margin decline in 2025 mainly involve three aspects: first, the repricing of existing loans has gradually been completed, easing downward pressure on loan yields; second, high-cost time deposits matured in concentrated batches, and with the interbank deposit self-discipline mechanism in effect, the rate of interest paid fell sharply; third, China Construction Bank proactively optimized the asset-liability structure, cutting back high-interest-paying deposits and expanding low-interest-paying interbank deposits.

The reporter learned that on the asset side, China Construction Bank increased the proportion of financial investments with relatively higher returns. In 2025, the share of such assets within earning assets increased by 1.66 percentage points. On the liability side, China Construction Bank used effective customer-tiered and -classified pricing to reduce the size of high-interest-paying deposits, while expanding interbank deposits with lower costs. Sheng Liurong emphasized that effective control of funding costs played a very large role in the marginal narrowing of the net interest margin decline.

From the standpoint of intermediary business income, in 2025 the six banks all maintained positive growth in net fee and commission income. Among them, Agricultural Bank of China’s net fee and commission income grew at a year-over-year rate of 16.57% in 2025, and Postal Savings Bank of China reached 16.15%, the two fastest-growing banks. In terms of the share of intermediary business income in total operating revenue, among the five large banks, the revenue share from fee-based businesses increased compared with 2024.

Agricultural Bank of China’s deputy governor, Lin Li, said that in 2025, Agricultural Bank of China’s wealth management income reached RMB 35.7 billion, and wealth management fee income was RMB 25.1 billion, becoming a new growth engine. It is reported that the substantial growth in Agricultural Bank of China’s net fee and commission income in 2025 mainly benefited from higher income from wealth management products and fund distribution/agency sales. In particular, growth in the agency business was 87.8%.

Liang Shidong, general manager of Postal Savings Bank of China’s retail business, said that Postal Savings Bank of China’s strategy is, on the premise of solidifying the first growth curve, to fully expand intermediary businesses, vigorously develop the second growth curve, and that wealth management is an important pillar of the second curve. It is reported that last year, Postal Savings Bank of China’s wealth management business developed rapidly, with private banking customers increasing by 26%. In addition, while maintaining its insurance advantage, Postal Savings Bank of China’s non-insurance revenue growth exceeded 38%. Non-insurance revenue as a share of total agency sales revenue accounted for more than half, increasing by 14 percentage points compared with the prior year.

“In 2025, against the backdrop of complex and ever-changing internal and external conditions and continuously increasing uncertainty, the six banks delivered an overall solid asset-quality performance and results with clearly differentiated profitability pressure.” said Dong Ximiao, chief economist at CMB International. “Overall, the profitability of large commercial banks has declined to some extent under the impact of the low interest-rate environment, and the narrowing of net interest margins has become a common challenge.”

The net interest margin turning point is getting closer

A relevant official of the People’s Bank of China previously said at a press conference that in 2026, large-scale long-term deposits such as three-year and five-year deposits will mature and be repriced. A research report from CICC estimated that the maturing scale of residents’ fixed deposits in 2026 is about RMB 75 trillion. As deposit interest rates continue to fall, several state-owned banks also responded at earnings release meetings to the topic of large batches of time deposits maturing.

At an earnings meeting, Zhou Wanf fu, deputy governor of Bank of Communications, pointed out that in the past few years, the banking industry generally faced the issue that deposit repricing lagged behind loan repricing. But as deposit benchmark rates are reduced and a large volume of time deposits mature and are repriced, the cost of interest paid on deposits will decline noticeably. This year, the scale of Bank of Communications’ time deposit maturities increased compared with last year, and a larger proportion is concentrated in the first quarter. The effect of deposit repricing is expected to provide strong support to the net interest margin for the full year.

Yang Jun, deputy governor of Bank of China, also said that starting from the second half of 2025, the maturity scale of Bank of China’s time deposits increased. Because current deposit interest rates are lower than those on time deposits three years ago, the repricing of the above deposits will lead to a decline in the rate of interest paid on deposits, which will have a positive impact on Bank of China’s ability to stabilize its net interest margin level.

Looking ahead to the trajectory of net interest margins in 2026, the six banks generally believe that the trend of marginal stabilization is expected to continue.

姚明德, deputy governor of Industrial and Commercial Bank of China, expects that in 2026 the net interest margin of the banking industry may show an “L-shaped” trend. Although the downward trend of net interest margin in the short term has not changed, favorable factors that will drive improvement in net interest margin performance are continuing to accumulate, and the trend of marginal stabilization is expected to persist.

He specifically mentioned that in the first two months of this year, the new issuance rates for corporate loans and personal housing loans at Industrial and Commercial Bank of China have already shown signs of stabilization. Compared with last year, the new issuance loan rates fell by only 2 BP, and by 18 BP less on a year-over-year basis, with the decline clearly narrowed. If we do not consider further major adjustments to the LPR and deposit benchmark rates, it is expected that in this year Industrial and Commercial Bank of China’s net interest income will turn positive year over year and reach a turning point, and the extent of the net interest margin decline will further converge compared with 2025.

Wang Zhiheng, president of Agricultural Bank of China, also responded that the growth rate of net interest income has turned positive year over year and is expected to reach a turning point in the first quarter. He revealed that based on the situation in the first two months of 2026, Agricultural Bank of China’s business operations continued to maintain a steady and positive trend. Entity loans increased by RMB 1.1 trillion, representing an additional year-over-year increase, and the trend of net interest margin stabilization was evident, laying a solid foundation for the bank-wide growth in profitability.

Editor-in-charge: Feng Yingzi. Editor: Zhang Zhiwei