Live Performance Review | "Don't chase quick profits, don't build big clients," Zhejiang Commercial Bank's 2025 performance report is released. The new leadership team responds to hot topics such as interest rate spreads and precious metals.

Every day reporter | Li Yuwen Every day editor | Huang Sheng

“Under industry conditions where net interest margins continue to narrow, competition in the sector intensifies, and risk control faces mounting pressure, we have not blindly pursued a scale complex, nor have we overly focused on short-term performance to make quick money, nor have we taken the old path of building up big customers by force. Instead, we have adhered to a long-term approach—solidifying the foundation, optimizing the structure, strengthening compliance, and controlling risks—to achieve generally steady overall performance.” On March 31, Chen Haiqiang, Chairman of China Merchants Bank (CMB), said at the bank’s 2025 annual performance briefing.

At the meeting, the newly appointed leadership team of China Merchants Bank responded to hot-button issues such as performance figures and operating strategy that market participants are focused on.

In 2025, China Merchants Bank recorded operating income of 62.51B yuan and net profit attributable to shareholders of 12.93B yuan, both down year over year. By the end of 2025, the bank’s total assets were 3.48 trillion yuan, up 4.68% from the end of the previous year. The ratio of non-performing loans was 1.36%, down 0.02 percentage points from the end of the previous year.

The narrowing in net interest margin is clearly less pronounced, but there is still some short-term pressure

In 2025, China Merchants Bank’s net interest margin was 1.6%, down 11 BP from the previous year. “Compared with the 20 BP drop in 2023 and the 30 BP drop in 2024, the contraction in the net interest margin is clearly smaller.” Lü Linhua (to be appointed), President of China Merchants Bank, said.

Cutting the deposit interest cost ratio is an important measure for banks to ease net interest margin pressure. In 2025, China Merchants Bank’s deposit interest cost ratio fell 32 BP year over year. When responding to questions about the development of its corporate banking business, Luo Feng, Vice President of China Merchants Bank, said that by the end of 2025, the bank’s corporate deposit interest cost ratio was reduced to 1.61%, down nearly 35 BP from the beginning of the year.

Regarding market concerns about whether maturing deposits will leave, Luo Feng said that in 2025, some of the bank’s existing time deposits matured, and the overall funds retention rate remained at a high level; most of the matured funds still stayed within the system. The reporter noted that by the end of 2025, China Merchants Bank’s corporate deposits accounted for more than 78% of total deposits.

At the performance briefing, Lü Linhua explained in detail the measures the bank took to respond to the narrowing of net interest margins from the asset side: first, strengthen pricing management for customers and rein in the trend of falling prices for asset allocation too quickly; second, continuously manage net interest margins during the process, and establish an end-to-end management mechanism covering expectation-setting, decomposition, monitoring, and evaluation; third, fine-tune the structure by activating existing stock assets, aggressively dispose of ineffective and low-efficiency assets. This year, the recognition standards for low-efficiency assets are even stricter.

When discussing net interest margin outlook, Lü Linhua believes that asset-liability structures and the banks’ own repricing cycles differ, resulting in different net interest margin performance and operating patterns. Some of the higher-yield assets that China Merchants Bank previously deployed are gradually exiting. Meanwhile, under the “low risk, broadly comparable returns” strategy, the yield on newly deployed assets has declined, and net interest margins remain under pressure in the short term. However, based on some measures already taken for the future and at present, it is believed that net interest margins in the banking industry can gradually stabilize.

Last year’s fund-related business weighed on non-interest income; efforts are underway to develop asset-light, high-stickiness fee income

In 2025, China Merchants Bank’s operating income and net profit attributable to shareholders decreased year over year by 7.6% and 14.8%, respectively. Lü Linhua said this was mainly affected by two factors:

First, regarding interest income: the economy is still in a weak recovery state. Effective credit demand is gradually recovering, the industry’s net interest margin narrowing trend continues, and China Merchants Bank’s net interest margin changes broadly follow the industry’s overall trend.

Second, regarding non-interest income: compared with the one-way market in 2024, in 2025 the bond market saw wide-range turbulence and increased volatility, which significantly affected the returns on trading financial assets. In 2025, the bank’s net non-interest income decline was close to 20%.

From the financial statement data, losses from fair value changes are the main drag on other non-interest income.

When responding to questions related to the gold market business, Jing Feng, Vice President of China Merchants Bank, provided additional information. “One of the biggest pieces with a large year-over-year decline last year is the fund-related business, which is consistent with the trend across the whole market. On the one hand, absolute yields compressed sharply; on the other hand, by the end of 2024 there were large unrealized fair value gains on the books. Compared with that, the core holdings in traditional positions turned into slight unrealized losses by the end of 2025, so ‘in comes and out goes’—the biggest variable is right here.”

Jing Feng also said that if one looks at the specific structure of the gold market business, although traditional bond business still recorded excess returns last year—contributing with year-over-year growth—through building an investment research and trading system and running band-based trading. The foreign exchange business and others also maintained solid profitability. He believes that in 2026, global interest rates and asset price performance will face greater uncertainty. “Against this backdrop, we will maintain a relatively prudent stance in investing across different types of assets, and we will also prepare corresponding contingency plans and response measures.”

When discussing 2026 operating outlook, Lü Linhua said, “For 2026, in terms of operating income, we still need to put great effort into driving growth on both the asset and liability sides. We must, by every means, work hard to stabilize net interest margins. On this basis, we also need to increase the sources of fee income to ensure our operating income is steady and sustainable. In addition, on the profit side, we need to continue to advance comprehensive cost controls, keep things tight, and make sure to squeeze out unnecessary ‘water’ in costs.”

Lü Linhua further discussed “improving the sources of fee income,” saying that China Merchants Bank is advancing a three-year fee income enhancement campaign. “In this process, we have a consideration: we need to change the phenomenon in the past where fee income improvement was driven by asset deployment and credit expansion. We will work to develop asset-light, high-stickiness fee businesses such as settlement services, agency sales, and custody. At the same time, we also need to strengthen the linkage between revenue and expenses—figure out every expense behind each piece of fee income, and then fine-tune the structure and increase the overall level of fee income.”

“One of the biggest variables last year,” gold and precious metals trading volume expands 8-fold year over year

Since last year, gold prices have fluctuated at high levels, drawing significant attention from the market, which has also brought greater focus to banks’ precious metals business.

When responding to questions related to the gold market business, Jing Feng said that precious metals were “one of the biggest variables last year,” and he provided a detailed explanation of this segment.

He said that while maintaining the advantages of hedging trading, last year China Merchants Bank introduced quantitative factor models on top of traditional fundamental and technical analysis to expand and strengthen directional trading. In 2025, the gold market showed a one-way uptrend. The bank firmly captured this hot行情, and the bank’s full-year precious metals trading volume expanded 8-fold compared with 2024. Since the first quarter of 2026, market heat has continued to carry on.

Worth noting is that since the beginning of the year, the gold price has experienced several sharp fluctuations. In Jing Feng’s view, “this was also a very good pressure test and a test of our ability to respond.”

He believes that as market volatility increases, it is not ruled out that gold and certain other individual metals may present opportunities at the stage level in 2026. China Merchants Bank will enhance its overall service capabilities for precious metals business from two dimensions.

On the one hand, deepen the core capability of its proprietary market-making business and build a profit growth mechanism. “Our trading capability accumulated in the precious metals market is the underlying capability that enables us to drive traffic and conversion and provide specialized services based on Internet channels.” He said it will continue to improve an integrated investment research and trading system, iterate the quantitative factor models, enhance the bank’s ability to respond quickly to the market, and precisely capture structural opportunities.

On the other hand, optimize the ecosystem layout for agency-client business to empower the bank’s client operations. Oriented toward client needs, continuously enrich product systems such as stored gold, physical precious metals, precious metals leasing, and agency trading, and promote product functional iteration as well as improvements in system service capabilities. At the same time, by focusing on the needs of the real economy, deepen the “one enterprise, one policy” service model, and provide tailored, comprehensive financial service solution plans for clients across the precious metals industry chain.

Cover image source: Liu Jiakui