The six major banks' non-performing loan balance is 1.6 trillion yuan: corporate non-performing loans are declining, while retail remains under pressure across the board.

Why Has AI Become the Biggest Driver of Rising Retail Non-Performing Loans?

Reporter Guo Congcong, 21st Century Business Herald

By the end of March 2026, six major banks—Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, and Postal Savings Bank—successively released their 2025 performance “report cards.”

From overall operating indicators, the six major banks’ asset scale has been expanding steadily, operating income and net profit both increased, and their total net profit attributable to shareholders of the parent company for the full year reached approximately 1.42 trillion yuan, with average daily earnings of about 38.9 hundred million yuan. Beyond profit growth, asset quality is also a key focus of the market.

As of the end of 2025, the combined non-performing loan balance of the six major banks totaled about 1.6 trillion yuan. Due to the expansion of credit scale, the non-performing loan balances of the six banks rose across the board. The non-performing loan ratio generally declined in a stable manner, and overall asset quality remained sound.

In terms of the non-performing loan ratio, except Postal Savings Bank, the other five major banks all saw slight decreases in their non-performing loan ratios. However, Postal Savings Bank remains the only bank with a non-performing loan ratio below 1%. The loan loss provision coverage ratio showed a pattern of “five declines and one rise”—only Bank of Communications recorded an increase; the other five saw declines to varying degrees. This means that banks are using their previous “surplus reserves” to deal with the erosion from bad loans.

From the perspective of non-performing loan structure, the non-performing loan ratios for corporate loans generally declined, and asset quality continued to improve; the non-performing loan ratios for retail loans rose, with personal housing loans, credit cards, and consumer loans becoming the main risk exposures.

As the ballast of operations, corporate loans have long been the core segment of credit deployment for the six major banks and have consistently held the top position in share. Benefiting from continuous risk screening and write-off and transfer efforts in recent years, non-performing loans in traditional high-risk industries have gradually been taken off the balance sheet, while credit resources have tilted toward relatively controllable areas such as manufacturing, inclusive finance, and green credit. As of the end of 2025, the non-performing loan ratios of the six major banks’ corporate loans generally showed a downward trend, with newly added assets being relatively controllable.

Specifically, Industrial and Commercial Bank of China’s corporate asset quality continued to improve, and its non-performing loan ratio fell to 1.36%, down 22 basis points from 2024. Although the non-performing loan balance increased, its growth rate was clearly lower than the loan growth rate. Among them, the non-performing loan ratio for manufacturing fell by 0.32 percentage points to 1.55%, non-performing loan ratios for infrastructure and transportation-related credit were both kept within 1%, risk in wholesale and retail continued to clear, and the non-performing loan ratio fell by 0.22 percentage points from the previous year.

China Construction Bank’s corporate loan non-performing loan ratio was 1.53%, down 12 basis points year-on-year. The non-performing loan balance for corporate loans increased, but it was also lower than the loan growth rate. Non-performing loan ratios declined across traditional pillar industries such as leasing, manufacturing, transportation, and power. Non-performing loan ratios for transportation and power-related credit were both kept within 1%, and risk in construction-related corporate loans continued to ease, with the non-performing loan ratio decreasing by 0.3 percentage points compared with 2024.

Agricultural Bank of China’s corporate loan non-performing loan ratio was 1.37%, down 21 basis points year-on-year. Non-performing loan ratios in traditional loans such as manufacturing and leasing and services declined by 0.18 and 0.16 percentage points, respectively; however, the non-performing loan ratios in real estate and wholesale and retail still remained at a relatively high level or rebounded slightly.

Bank of China’s domestic corporate loan non-performing loan ratio was 1.22%, down 4 basis points year-on-year. Non-performing loan ratios in commercial services, manufacturing, and infrastructure improved significantly. The non-performing loan ratio for the construction industry fell by 10 basis points, showing a trend toward risk convergence. However, the non-performing loan ratio for the real estate industry remained at a relatively high level and increased by 1.32 percentage points.

Bank of Communications’ corporate loan non-performing loan ratio reached 1.19%, down 28 basis points year-on-year, the largest decline among the six major banks. Non-performing loan ratios for manufacturing and wholesale and retail fell by 5 and 20 basis points, respectively. The non-performing loan ratio for the new energy industry fell by as much as 39 basis points. The non-performing loan ratio for real estate also fell by 65 basis points to 4.2%. Corporate asset quality optimization was significant.

Postal Savings Bank’s corporate loan non-performing loan ratio was 0.54%, unchanged year-on-year, remaining the lowest level among the six major banks. Non-performing loans in the real estate industry decreased by nearly 500 million yuan, and the non-performing loan ratio fell by 0.36 percentage points to 1.58%. The water conservancy and environmental industry and the leasing and services industry also saw declines of 0.18 and 0.08 percentage points, respectively, but there were some rebounds in manufacturing and the construction industry.

Overall, the corporate non-performing loan ratios of the six major banks are concentrated in the 0.54%-1.53% range. Policy-supported areas such as manufacturing, infrastructure, and green finance have become the main drivers of corporate asset quality improvement. Corporate real estate risks have continued to ease, and risks in wholesale and retail have been gradually clearing.

In sharp contrast, in 2025 the retail loan non-performing loan ratios of all six major banks increased, and the increase was concentrated between 0.13-0.50 percentage points, becoming the main source of pressure on asset quality. Among them, personal housing loans, credit cards, and consumer loans are the three core areas behind the rise in non-performing loans. At this year’s earnings releases, “pressure on the asset quality of personal loans” has been a topic that major banks can hardly avoid.

Looking at sub-segments, personal housing loans are the biggest driver of the rise in retail non-performing loans. Across the six major banks, the non-performing loan ratios for housing loans generally rose from 0.6%-0.7% to 0.9%-1.1%, increasing by 0.2-0.4 percentage points. This was mainly affected by significant factors such as adjustments in the real estate market and notable fluctuations in residents’ incomes. Next are credit cards: except for Agricultural Bank of China and Postal Savings Bank, the other four major banks’ credit card non-performing loan ratios all broke through 2%, reaching as high as 4.61%. With the uneven recovery of consumption, the risk of overdraft defaults increased. Consumer loan non-performing loan ratios also rose in tandem, and credit-limit-based consumer loans, car loans, and others all faced certain pressure.

Facing the reality that retail non-performing loans are accelerating in their formation, in the second half of 2025 the six major banks clearly stepped up their efforts to dispose of non-performing assets. The disposal methods also expanded from traditional write-offs and collections to market-oriented approaches such as asset securitization and bulk transfers.

Non-performing asset securitization (ABS) has grown significantly in scale. In 2025, Postal Savings Bank disposed of 968.78 billion yuan of non-performing principal and interest. Of this, 338.02 billion yuan came from non-performing asset securitization, accounting for more than one-third. Its scale far exceeded cash recovery and bad-debt write-offs. Industrial and Commercial Bank of China also stated that in 2025 it issued 15 non-performing asset securitization projects, with a combined issuance size of 111.68 billion yuan, up 176.0% from the previous year. It can be seen that enabling non-performing assets to be removed from the balance sheet quickly through ABS has become the preferred tool for major banks to optimize their on-balance-sheet indicators.

Bulk transfers have become an important supplement to the disposal of retail non-performing loans. Especially in the second half of 2025, and particularly in the fourth quarter, the number of non-performing asset transfer listings at the Yindeng Center increased noticeably. Several major banks including Industrial and Commercial Bank of China, China Construction Bank, and Bank of Communications placed large batches of packages of personal operating loans, consumer loans, and credit card non-performing asset portfolios on the market for sale. In just the first 3 days before April 2026, Bank of China, China Construction Bank, Postal Savings Bank, and Bank of Communications listed 8 non-performing asset portfolios, with a total unpaid principal and interest exceeding 350 million yuan.

The loan loss provision coverage ratio generally declined, and the risk buffer cushion was consumed. At the end of 2025, except for Bank of Communications, whose loan loss provision coverage ratio increased by 6.44 percentage points compared with the end of the previous year, the other five major banks all saw declines to varying degrees. Among them, Postal Savings Bank had the largest decline, reaching 58.52 percentage points. The decline in the loan loss provision coverage ratio, on the one hand, released part of profits to support the growth rate of net profit; on the other hand, it also reflected that amid the acceleration in non-performing loan generation, banks are using the “surplus reserves” accumulated earlier to absorb bad debts.

At the earnings releases of the six major banks, management’s outlook for asset quality in 2026 was basically consistent: risk control of retail credit is the top priority for the whole year.

Wang Jingwu, vice president of Industrial and Commercial Bank of China, judged that the rise in personal loan non-performing loans is influenced by multiple factors including economic transformation, real estate adjustments, and temporary supply-demand imbalances at certain stages. However, the conditions supporting long-term positive trends and the basic trend have not changed, and the risks of personal loans are controllable.

Li Jianjiang, vice president of China Construction Bank, said that risk prevention and control in the retail sector will remain one of the bank’s key focuses. With various management mechanisms and control measures further implemented and made more detailed, overall asset quality is expected to remain stable.

Lin Li, vice president of Agricultural Bank of China, emphasized that in the next two to three years, the dividing line for commercial banks lies in their risk management capabilities, and Agricultural Bank of China will continue to firmly grasp and implement the primary task of preventing risks.

Gu Bin, vice president of Bank of Communications, believes that the real estate market is in a stage of bottoming out and stabilizing, and risks related to real estate will continue to be closely watched.

Yao Hong, chief risk officer of Postal Savings Bank, believes that as the effects of subsequent national policy measures gradually become apparent, and with the macro environment stabilizing, the recovery and improvement of residents’ and enterprises’ debt repayment ability will enhance. In 2026, the pace of non-performing loan generation for the bank’s personal and small business loans will stabilize and improve.