Bank retail performance is under pressure; how to innovate and break through?

Questioning AI · Why Does Retail Profit Decline Despite AUM Growth?

According to the annual report data of 6 state-owned banks and 11 nationwide joint-stock banks compiled by “Caijing,” retail AUM (Asset Under Management) generally increased, overall revenue remained relatively stable, but retail business profits still face pressure, with most non-performing loan ratios rising.

Text | “Caijing” Researcher Cheng Weimiao

Editor | Zhang Yingxin, Chen Hongjie

Under the influence of factors such as real estate industry adjustments, residents’ consumption still being insufficient, and fee reductions and concessions, the overall retail banking business remains under pressure.

As of April 2, most large and medium-sized banks have disclosed their 2025 annual reports. Based on the annual report data of 6 state-owned banks and 11 nationwide joint-stock banks (Guangfa Bank had not disclosed at the time of press), retail AUM (Asset Under Management) generally increased, overall revenue remained relatively stable, but retail business profits still face pressure, with most non-performing loan ratios rising. Among the 12 banks with comparable disclosed data, 3 banks reported losses in retail business; 6 banks saw year-over-year profit declines, with the largest drop reaching -1117%.

Meanwhile, at recent earnings calls of multiple listed banks, issues such as mortgage scale, credit card risks, and retail asset quality remain frequently discussed topics.

It should also be noted that in the data statistics related to retail business this time, some banks use the term “Personal Finance/Personal Banking,” while others use “Retail Finance/Retail Banking.” Although there are slight differences in the inclusion of relevant indicators across banks, these do not affect the overall trend, so they are analyzed together in this article.

AUM Growth, ICBC Ranks First

Based on the definitions in various banks’ annual reports, retail business mainly includes personal customer and deposit services, wealth management, retail lending, credit card services, debit cards and payment settlement, private banking, etc. AUM mainly includes deposits, wealth management products, funds, etc., reflecting the bank’s comprehensive customer value and wealth management capability in retail banking.

From the perspective of managed asset scale, 15 banks that disclosed relevant data all saw increases. By the end of 2025, ICBC, ABC, and CCB, the three state-owned banks, each had retail AUM exceeding 20 trillion yuan, at 25.37 trillion, 24.68 trillion, and 23.01 trillion yuan respectively, holding the top three spots, with growth rates over 10% for the year; Postal Savings Bank and Bank of China had retail AUM of 18.3 trillion yuan and 17.58 trillion yuan respectively.

Among joint-stock banks, “Retail King” China Merchants Bank’s retail AUM still leads significantly, reaching 17.08 trillion yuan by the end of 2025, a year-over-year increase of 14.44%; other joint-stock banks’ retail AUM did not exceed 6 trillion yuan, but SPDB and Zheshang Bank grew over 20% YoY.

The overall increase or high growth in retail AUM behind each bank is related to the recent years’ efforts to promote large-scale wealth management transformation amid narrowing interest spreads and intensified competition. For example, China Merchants Bank launched the slogan “Retail Re-Start,” proposing to improve asset quality, consolidate liabilities, and elevate wealth management to a new level. The bank’s chairman Miao Jianmin stated at the earnings call, “Wealth management is an important breakthrough for future retail business.”

Given the recent industry focus on the “deposit relocation” phenomenon, the importance of wealth management is even more evident. Industry insiders say that, amid a sharp decline in deposit yields, residents are increasingly shifting savings into financial products, insurance, and other non-bank financial assets. The rapid growth of non-bank deposits not only changes the bank’s liability structure but also poses new challenges for liquidity management, profitability models, and operational strategies.

Many banks have detailed their wealth management development strategies in annual reports or earnings calls.

For example, CCB stated it will continue to deepen the tiered, segmented, and graded management system for personal clients, promote the implementation of large-scale wealth management strategies, and strive to build a “private banking benchmark” brand image. Wang Jun, assistant president of Ping An Bank, mentioned at the earnings call that in response to market changes, the bank will follow the broader market, adjust the structure of assets and deposits, meet customer needs with tailored products and services, and enhance high-quality deposit inflows through scenario building.

Some banks are also restructuring organizational frameworks to match their wealth management transformation strategies. For instance, Bank of Communications established a Wealth Management Department at the head office level in 2025, and Postal Savings Bank set up a Wealth Management Department within its Personal Finance segment.

Six Banks See Profit Decline, Everbright Bank Down by -1117%

For a considerable period, retail finance has been widely regarded as a “good business” that earns interest spreads and increases intermediary income. Despite differences in business positioning and customer bases among banks, retail business remains a main contributor to revenue for many.

According to “Caijing,” among 13 large and medium-sized banks with comparable data, three reported that more than half of their 2025 revenue came from personal/retail business: Postal Savings Bank (65.46%), China Merchants Bank (56.59%), and Agricultural Bank (52.8%). Those with over 40% contribution included CCB (47.1%) and Ping An Bank (46.9%).

In absolute scale, larger banks with branch and customer advantages have higher revenue. In 2025, ABC, CCB, ICBC, BOC, and Postal Savings Bank each had personal/retail business revenue exceeding 200 billion yuan, at 383.3 billion, 358.4 billion, 327.7 billion, 259.9 billion, and 232.9 billion yuan respectively, ranking the top five. The sixth is China Merchants Bank with 191 billion yuan.

However, longitudinal comparison shows that the contribution ratio of personal/retail business revenue to total revenue has declined. By mid-2024, nine banks still had over 40% contribution, but by the end of 2025, this number dropped to five. Industry analysis suggests this is mainly due to the low interest rate environment and fee reduction policies, which limit core interest income.

Meanwhile, profit declines are even more pronounced. Among 12 banks with available data, six saw negative growth in retail business profits in 2025. The largest YoY decline was at Everbright Bank, with retail profits at -2.86 billion yuan, a drop of 1117% (11.17 times); the highest loss was at Zheshang Bank, with retail profits of -200k yuan, down 94.7% YoY.

The trend of pressure on retail business profits has persisted for some time. According to industry reports from CICC, Deloitte, and others, the proportion of retail revenue in total revenue has been declining since 2023, and the pre-tax profit share has been decreasing since 2021. The reasons include faster decline in retail asset pricing, weakening asset yield advantages, stable household leverage ratios, insufficient credit demand, dual pressures from fee reduction policies and capital market cycles, and increased non-performing loan pressures in retail lending.

In terms of financial indicators, this is reflected in the shrinking scale of high-yielding retail assets such as mortgage loans and credit card loans. “Caijing” statistics show that in 2025, the mortgage balances of six state-owned banks continued to decline, and credit card loan balances also decreased to varying degrees.

While interest income declines, retail risks are rising, leading to increased credit impairment losses, which “eat into” profits. For example, Everbright Bank’s total retail profit in 2024 was 281 million yuan, but in 2025 it fell to -2.86 billion yuan. “Caijing” notes that the bank’s net interest income in 2025 decreased by about 4.9 billion yuan, while credit impairment losses increased by about 700 million yuan. Is this the main reason for dragging down retail revenue and profit? “Caijing” has inquired further with Everbright Bank but has not received a response before publication.

Rising Non-Performing Rates, Over 2% at Huaxia Bank and Others

Currently, retail risk is a common challenge faced by banks.

According to “Caijing,” among 15 banks that disclosed personal loan NPL ratios, 12 saw increases compared to the beginning of the year, with rises ranging from 0.03 to 0.67 percentage points, including over 0.5 percentage points at Bank of Communications and Zheshang Bank. Only three banks saw declines, with the largest decrease at Bohai Bank.

Bohai Bank previously had high retail loan NPL ratios. The bank responded to “Caijing” that since 2023, it has abandoned scale obsession, focused on quality development, and worked to extricate retail business from reliance on high-risk premium loans and high-cost deposits by actively withdrawing high-risk assets and optimizing customer and asset structures, aiming to emerge from the short-term “pain” and establish a healthy long-term foundation.

During the earnings call, many bank executives also addressed retail asset quality and risk mitigation.

“From the current operation trend, risk prevention and control in the retail sector will remain a key focus,” said Li Jianjiang, Vice President of CCB. He mentioned that by optimizing credit risk management mechanisms, strengthening risk control at key credit process points, and implementing centralized risk management for retail credit, CCB’s multiple risk control measures in 2025 have shown results, with the increase in personal loan NPLs narrowing year-over-year.

Wang Jingwu, Vice President of ICBC, introduced that the bank has made adjustments in internal structure and functions, establishing a Personal Credit Business Department to achieve centralized and specialized management of personal loans. The bank also emphasizes digital intelligence, balancing growth and safety, and actively resolving various risk issues and disposing of non-performing assets.

“China’s long-term economic growth fundamentals and trends remain unchanged. With the accelerated implementation of a package of policies and the continued release of policy dividends, the foundation of the personal credit market will gradually improve, and the quality of personal loan assets will return to a reasonable level,” Wang said.

Qie Ye, Vice President of Everbright Bank, stated that mortgage loans and credit card-based consumer loans are under pressure, and the bank has identified these as key areas. It has taken measures to strengthen control and risk mitigation, such as strictly controlling new risks at the source, forming dedicated teams for coordination and support, and increasing efforts in debt collection and property disposal. These measures have achieved phased results in risk management of retail mortgage loans.

Looking ahead, will retail banking still be a “good business”? How will banks position this business, and where will they focus their efforts?

Industrial Bank, known for corporate banking, has been continuously advancing its retail system construction. Vice President Zhang Min said at the earnings call that under the background of declining interest rates and stricter regulation, retail banking is shifting from scale expansion to a stage focused on customer management and system capabilities, with systematization gradually becoming an industry consensus. “Industrial Bank has been promoting retail systematization in organizational structure, team management, customer management, and collaboration mechanisms, and will continue to focus on quality improvement and transformation.”

Ping An Bank, which excels in retail, states that the “most difficult phase of retail business has passed.” Vice President Wang Jun revealed that by 2026, the bank will more actively integrate into Ping An Group’s ecosystem for customer management, using precise customer segmentation and differentiated products to meet core needs such as wealth management and health protection; further optimize loan structures, release the capacity of mid-yield asset businesses, and expand consumer loans; and in large-scale wealth management, adhere to high-quality AUM growth as the main goal, continuously improving client allocation capabilities.

(The author is a “Caijing” researcher, with contributions from “Caijing” reporters Zhang Yingxin and Chen Hongjie.)

Editor | Wang Yi