Four listed banks' loan-to-deposit ratios have exceeded 100% for many years, with net interest margins under pressure

Since 2015, the loan-to-deposit ratio has no longer been used as a hard regulatory indicator for domestic banks’ liquidity risk management. But now, with banks’ net interest margins (NIMs) continuing to come under pressure, industry competition logic is gradually shifting from expansion of scale to cutting costs and improving efficiency. The risk pressure that a relatively high loan-to-deposit ratio may bring is drawing more and more attention.

As of the end of 2025, the loan-to-deposit ratios of China Huaxia Bank, China Minsheng Bank, Pudong Development Bank, and Industrial Bank have all been above 100%, and for several consecutive years they have continued to top the industry rankings. By comparison, the four major state-owned banks have the highest loan-to-deposit ratios at around 91%. Among joint-stock banks, China Merchants Bank’s loan-to-deposit ratio is only 73.79%.

Several institutional insiders told First Finance and Economics that although the loan-to-deposit ratio’s signaling significance for liquidity risk is already limited, in the low–interest-rate margin era, low-cost deposits on the liability side are increasingly concentrated in settlement banks. The asset side also puts more emphasis on banks’ ability to smooth their investment and profit-making. As a result, the observation value of the loan-to-deposit ratio rises further.

Several joint-stock banks’ loan-to-deposit ratios have long remained above 100%

According to WIND data, as of the end of 2025, among 22 listed banks that have already disclosed their annual reports, 10 have loan-to-deposit ratios (ending loan balance / ending deposit balance * 100) exceeding 90%. China Huaxia Bank, China Minsheng Bank, Pudong Development Bank, and Industrial Bank continue to rank toward the top of the industry with loan-to-deposit ratios above 100%.

With overall loan growth slowing, most banks’ loan-to-deposit ratios declined last year. But if we look longitudinally, the loan-to-deposit ratios of the four joint-stock banks mentioned above have remained at elevated levels of above 1x for several consecutive years. Among them, Industrial Bank has had the shortest duration—though it already has 5 years. China Huaxia Bank, which has long been “topping the charts,” saw its loan-to-deposit ratio exceed 116% at the end of 2021.

In recent years, the loan-to-deposit ratio at Everbright Bank has also been climbing steadily, rising from under 90% to 98.77% at the end of last year. The loan-to-deposit ratios of CITIC Bank and Ping An Bank have also stayed above 100% from 2021 to 2023, and over the past two years they have gradually fallen. At the end of last year, they were 96.91% and 94.64%, respectively.

The loan-to-deposit ratio can be used to monitor the extent to which commercial banks are “funding loans with deposits,” as well as the resulting pressure on the liability side. In the past, it was also an important indicator for observing banks’ liquidity risk. Regulators once set an upper limit of 75%. Since 2015, the loan-to-deposit ratio has been adjusted from a regulatory indicator to a monitoring indicator, and there is no longer a hard compliance threshold.

Several brokerage analysts told reporters that as banks’ sources of funds have become more diversified and regulatory requirements are gradually being optimized to align with international standards, the loan-to-deposit ratio is no longer a key focus indicator at the level of liquidity risk. Usually, as long as a few regulatory indicators fall within a reasonable range, it is generally considered that liquidity is “not a problem.”

So, does a persistently high loan-to-deposit ratio still correspond to higher liquidity risk? At present, in terms of liquidity risk management, my country’s commercial banks apply “five regulatory indicators plus multiple monitoring indicators.” Among the regulatory indicators, the Liquidity Coverage Ratio (LCR) is one of the most closely watched core indicators.

As of the end of 2025, among nine listed joint-stock banks, the highest LCR was at China Merchants Bank (220.3%), while the lowest was at Ping An Bank (132.87%), leaving a safe buffer from the 100% compliance line. Among several joint-stock banks with relatively high loan-to-deposit ratios, except for Industrial Bank and China Huaxia, last year their LCRs all declined to varying degrees. The largest drops were at CITIC Bank (-73.91 percentage points), China Minsheng Bank (-26.39 percentage points), and Pudong Development Bank (-12.27 percentage points). At the end of last year, besides Ping An, China Minsheng’s LCR was also below 140%, lower than the industry average level.

Data from the National Financial Regulatory Administration show that since 2019, my country’s banking industry loan-to-deposit ratio (on a domestic basis) has gradually risen from below 75%. In the most recent two years, it has stabilized at around 80%. In the fourth quarter of 2025, it was 80.08%. For the liquidity coverage ratio, the industry level in the fourth quarter of last year was 157.99%.

(Note: In 2014, the regulatory authorities issued a document optimizing the statistical scope of the numerator and denominator in the loan-to-deposit ratio calculation formula. The numerator excluded six items, such as “loans corresponding to re-lending to support agriculture” and “loans corresponding to re-lending to support small businesses,” while the denominator added two items, such as “large transferable negotiable certificates of deposit issued by banks to enterprises or individuals.” Because each bank discloses information differently under the regulatory definitions, for the sake of comparison, this article standardizes the calculation scope of the loan-to-deposit ratio as “ending loan balance / ending deposit balance * 100.” The loan-to-deposit ratio data under the regulatory definitions should be based on each bank’s financial statements disclosure.)

Who relies more on interbank funding and bond issuance?

Dong Ximiao, Chief Economist of Zh lian and Deputy Director of the Shanghai Finance and Development Laboratory, told reporters that the level of the loan-to-deposit ratio is related to both the pace of credit deployment on the one hand and, on the other hand, reflects characteristics of the liability-side funding structure.

From the perspective of funding sources, under circumstances where loan deployment is not accelerating significantly—or is generally slowing—an above-average loan-to-deposit ratio is often viewed as a general shortfall in non-interest-bearing or ordinary deposit sources. In order to make up the gap, banks may need to seek more other liabilities with higher costs (such as interbank funding or bond issuance).

The liability structure directly affects the level of interest expense rates and the difficulty of reducing costs. “There is no absolute relationship between the loan-to-deposit ratio and the net interest margin. But typically, banks with a lower proportion of ordinary deposits tend to have lower net interest margins. And different banks have different liability structures.” A senior banking industry analyst told reporters that, in general, ordinary deposits—especially demand deposits—have cost advantages. The higher the proportion of such funds, the lower the cost; conversely, the greater the pressure on the net interest margin.

Another industry insider also said that the observation significance of the loan-to-deposit ratio is increasing now—“because deposit distribution is concentrating more and more in settlement banks,” meaning that state-owned big banks, as well as leading joint-stock banks such as China Merchants Bank and Ningbo Bank, and city commercial banks will have more advantages.

Based on the reporters’ review of annual reports, in 2025 the top three banks by net interest margin among nine listed joint-stock banks were China Merchants Bank (1.87%), Ping An Bank (1.78%), and Industrial Bank (1.71%). The net interest margins of Pudong Development Bank (1.42%), China Minsheng Bank (1.40%), and Everbright Bank (1.40%) were “at the bottom” among their peers. In the past two years, the sharpest declines in net interest margins were at Ping An Bank (-60BP), Zheshang Bank (-41BP), and Everbright Bank (-34BP).

The main factors driving net interest margin pressure differ due to differences in asset-liability structure across banks. However, from the perspective of liability structure, these joint-stock banks with higher loan-to-deposit ratios and greater net interest margin pressure tend to rely more heavily than their peers on funding sources other than deposits, such as interbank funds.

As can be seen from the table above, the advantage in the liability structure at China Merchants Bank remains difficult for other banks to match. Its proportion of ordinary deposits is generally above 80%. In a context where the deposit proportion for most joint-stock banks is maintained at more than 60%, Industrial Bank and China Huaxia Bank are at the bottom with deposit proportions of 59.14% and 55.55%, respectively. The deposit proportions at China Minsheng Bank and Pudong Development Bank are also relatively later in the ranking.

Correspondingly, Industrial Bank, Pudong Development Bank, and China Huaxia Bank show a clearly higher reliance on interbank liabilities. At the end of last year, the combined share of interbank and other financial institution lending and borrowing for the three were 25.3%, 22.46%, and 20.04%, respectively. In the same period, China Merchants Bank’s share of this type of funds was only 10.65%.

Another important source of bank funds is bond issuance. As of the end of 2025, among liabilities, the highest proportion of accounts payable bonds (including interbank certificates of deposit, general financial bonds, subordinated capital bonds, etc.) was at Everbright Bank, exceeding 20%. Zheshang Bank, China Huaxia Bank, and China Minsheng Bank also had bond proportions of over 14%.

The usage rate of interbank certificates of deposit also, to some extent, reflects how tight or loose a bank’s funding is. According to Enterprise Early Warning data, last year the usage rates of interbank certificates of deposit for China Merchants Bank, Industrial Bank, and Ping An Bank were 1.86%, 37.28%, and 40.76%, respectively. Meanwhile, the quota usage rates for Everbright Bank, China Minsheng Bank, China Huaxia Bank, and CITIC Bank were 93.65%, 79.11%, 66.23%, and 63.95%, respectively.

Large differences in the proportions of demand deposits and time deposits

Because of differences in fund pricing, in the past a higher proportion of ordinary deposits generally brought a larger cost advantage. The higher the proportion of interbank funds and bond issuance, the easier it is to weaken that advantage. However, it also depends on the specifics.

For example, when the industry’s net interest margin was generally declining, China Minsheng Bank’s net interest margin rose against the trend by 0.01 percentage points last year, and Pudong Development Bank also maintained its level at 1.42%. The reporters reviewed annual reports and found that the pricing of interbank deposits is a key influencing factor.

Since the tightening of industry self-regulatory standards for interbank funding in the second half of 2024, the interest expense rates on interbank deposits at banks have all shown a clear downward trend. According to China Minsheng Bank’s annual report, the bank’s average cost rate for deposits last year was 1.74%, down 40BP from 2024. In the same period, the average cost rate for interbank deposits fell by 58BP, from 2.29% to 1.71%, which is unusually lower than the cost of ordinary deposits.

However, it remains the norm that the cost of ordinary deposits is lower than the cost of interbank funds and bond issuance; the key is to look at the proportion of high-cost time deposits versus low-cost demand deposits.

Last year, the amount by which deposit costs were reduced at joint-stock banks was more than 30BP across the board. The reductions at Ping An Bank and China Minsheng Bank were both over 40BP. At period-end, the highest average deposit cost rate was Everbright Bank’s 1.81%, and the lowest was China Merchants Bank’s 1.17%, a difference of 64BP between the two ends.

Time deposits are still a major component of deposits at each bank. At the end of last year, Zheshang Bank’s proportion of time deposits was close to 75%. Ping An Bank, China Minsheng Bank, Everbright Bank, and Pudong Development Bank also had time-deposit proportions above 60%. In the same period, China Merchants Bank’s proportion of demand deposits reached 51%, while its time-deposit proportion was only 49%, making the cost pressure clearly evident.

From specific pricing, most banks’ average cost rates for corporate deposits are lower than their average cost rates for personal deposits. Data at the end of last year showed that Zheshang Bank’s proportion of corporate deposits exceeded 80%, and CITIC Bank, Pudong Development Bank, and China Minsheng Bank’s corporate deposit proportions were also close to 70%. But because their time-deposit proportions are generally higher, this to some extent offsets their cost advantage.

(This article is from First Finance and Economics)