During counter-cyclical periods, how can banks grow against the trend?

Ask AI · How can Industrial Bank’s fintech become a new growth engine?

In the past two years, amid a complex market environment, bank stocks have swept ahead, becoming the strongest sector in A-shares. But starting in the second half of 2025, bank stocks began to bid farewell to the collective party and entered an era of more localized, diverging performance.

The performance of the capital markets has always been a reflection of industry fundamentals. In recent years, although bank stock valuations have risen, the whole industry has still been under pressure from narrowing interest spreads and rising non-performing assets. In the next stage, it will be banks that can first move out of the cycle and reverse fundamentals that qualify as high-value banks.

Against this backdrop, sorting out the business breakthrough logic of banks delivering growth against the trend is undoubtedly an excellent sample for observing how joint-stock banks break through.

For example, China Merchants Bank has stayed committed to retail banking, and it has finally waited for the recovery in wealth management—its performance has returned to growth. Unlike China Merchants Bank, Industrial Bank’s growth logic is to proactively explore structural opportunities in the industry. Its “fourth calling card,” fintech—fully sharpened—may unlock the long-term growth ceiling.

/ 01 /

Finding growth amid differentiation

In the past few years, the banking industry has not had an easy time. Net interest margins have continued to narrow, directly dragging down performance growth speed; on top of that, under pressure from the macro environment, asset quality pressure has also been transmitting onward. With multiple pressures intertwined, the performance of listed banks has generally been under strain.

Among the top joint-stock banks that have already released annual reports, CITIC Bank’s revenue in 2025 fell 0.5% year-on-year, while China Merchants Bank’s revenue grew by only 0.01% year-on-year.

From the overall industry perspective, the performance pressure is most pronounced for joint-stock banks because they neither have the nationwide resource endowment of large state-owned banks, nor do they have the same depth of local cultivation as city commercial banks. In the first three quarters of 2025, the average revenue of listed joint-stock banks fell by 2.7% year-on-year, and net profit declined by 0.2% year-on-year.

Taking a closer look, bank income pressure can be explained from two major dimensions: pressure on the growth of interest-earning assets and the decline in asset yield.

In terms of the growth rate of interest-earning assets, affected by the broader environment, with reduced demand for social financing, the industry has encountered what is often described as a “project shortage” problem. In the first three quarters of 2025, the quarter-on-quarter growth rate of interest-earning assets of listed banks decreased by 0.4 percentage points.

With interest-earning asset growth already under pressure, bank asset yields have also been declining. Combined factors such as banks providing more concessions to the real economy, falling mortgage interest rates, and the reduction of the Loan Prime Rate (LPR), mean that bank lending rates are still falling. In the first three quarters of 2025, the quarter-on-quarter decline in asset yield of listed banks was 0.07 percentage points.

However, viewed longitudinally, the problem of declining yields has also eased. In the third quarter of 2025, the quarter-on-quarter narrowing of the decline in interest-earning asset yields of listed banks was 4bp.

According to analysis from Citic Securities, the pricing of new corporate loans continues to fall, but the rate of decline has narrowed, and pricing for new retail loans may already have stabilized. For example, in the third quarter of 2025, the weighted average interest rate on personal housing loans stabilized and rebounded slightly—up 1bp from June to 3.07%.

At this key turning point of challenges and recovery, some banks have quietly begun to recover.

For example, among banks that have published their 2025 annual reports, the four major state-owned banks—ICBC, Agricultural Bank of China, Bank of China, and China Construction Bank—have each achieved stable performance growth by leveraging their nationwide resource advantages and the strong momentum of central SOE projects.

Among city commercial banks, Qingdao Bank has the highest growth rate. The core reason lies in geographic advantages: as one of the few northern city commercial banks located in coastal regions, Qingdao Bank has intensified its layout in cross-border finance and the marine economy. For example, by rolling out products such as “Port Cloud Warehouse,” “Fishing Vessel Loans,” “Seaweed Loans,” and “Export Fast Loans,” it covers financing needs for overseas-going enterprises across multiple fields, including port logistics, marine environmental protection, fisheries, and foreign trade.

Meanwhile, among joint-stock banks, Industrial Bank is the first to recover. In 2025, Industrial Bank’s revenue grew by 0.24% year-on-year, and net profit grew by 0.34% year-on-year, maintaining positive growth for two consecutive years.

Industrial Bank’s recovery is about aligning with economic transformation: compressing traditional inefficient assets and increasing investment in new tracks. Industrial Bank Chairman Lü Jiajin mentioned: “China’s economy is undergoing deep transformation. In response, we will focus on adjusting and optimizing our asset structure, do a solid job of the ‘five major financial initiatives,’ and continue to increase our deployment in new drivers of economic growth.”

For example, in the green finance arena, Industrial Bank has gone deep into watershed governance, providing financial support for the upgrading and transformation project of the Yangli sewage treatment plant in Fuzhou, which is located in the Min River basin. It has also provided cumulative financial support exceeding 5 billion yuan in the Mulan Creek basin, and credit approvals exceeding 2 billion yuan in the Jinjiang River basin—helping build exemplary models of beautiful rivers and lakes.

While credit business recovers steadily, Industrial Bank’s intermediary business has also entered a recovery turning point, becoming an important support for performance growth.

/ 02 /

Seeking answers in pain points

In the industry background of bank interest spreads continuing to decline, intermediary business should have become the core tool to hedge interest-rate pressure and ease operational difficulties. But over the past few years, growth in the industry’s intermediary income has generally been weak.

For example, in 2024, net fee and commission income of listed banks decreased by 9.4% year-on-year. Finally, by 2025, as the impact of the “reporting and operating as one” policy weakened and wealth management demand rebounded, there were signs of a turnaround in the intermediary business of listed banks. However, the growth rate has not been released strongly. As of the first three quarters of 2025, the year-on-year growth rate of net fee and commission income for listed joint-stock banks was only 1.3%.

Weak growth in intermediary income is related not only to the macro environment, but also to the industry’s homogenized service offerings.

From the external environment, volatility in capital markets and relatively weak resident consumption have generally put pressure on businesses such as wealth management, fund agency sales, and credit cards. Internally, in some banks, intermediary income businesses have shortcomings such as single product structure and insufficient capabilities in investment research and development, making it difficult to form differentiation. This has caused banks to fight a fee-rate war; even some products implement phased “0-fee” execution in an attempt to “make up for price with volume.”

Although intermediary business overall remains under pressure, the industry also has opportunities for structural growth.

From specific business areas, industry payment and settlement, credit card fees, and similar segments have seen sluggish growth due to factors such as market saturation and tighter rate regulation. Meanwhile, “new categories,” represented by wealth management, investment banking, and financial technology output, are becoming the core engines driving growth in intermediary income for some banks.

For instance, in 2025, China Merchants Bank (CMB) focused on implementing AI-powered smart investment advisory built on its TREE asset allocation system, and promoted buy-side advisory and full-cycle accompaniment. In terms of products, it selected and customized offerings with diversified supply, covering wealth management, funds, insurance, trusts, and cross-border services. In terms of services, it uses AI to empower “different people, different faces” and enable dynamic portfolio rebalancing, providing comprehensive solutions such as family trusts, retirement inheritance, and global allocation for high-net-worth customers. Ultimately, CMB’s wealth management revenue in 2025 increased by 21.39% year-on-year, far higher than the overall growth rate of its intermediary income business (4.39%).

Within the structural trend of intermediary business shifting from payment and settlement toward wealth management and investment banking, Industrial Bank is also a beneficiary.

Industrial Bank has long attached importance to the development of intermediary business. Chairman Lü Jiajin said: “Increasing the contribution of intermediary business income and forming a more stable revenue structure is an important experience for commercial banks at home and abroad to survive through the cycle. Last year, Industrial Bank seized the opportunity of the capital market’s rebound and promoted strong growth in its advantageous businesses such as investment banking, asset management, and wealth.”

In specific data terms, in 2025, Industrial Bank’s wealth sales intermediary income increased by 3.49% year-on-year, and its custody intermediary income grew by 5.35% year-on-year.

Looking ahead, in its performance briefing, Industrial Bank’s management mentioned that it will promote steady development of wealth management business along two dimensions: the product system and customer service. On the product side, it will keep in sync with the market’s pace and improve the cash and fixed-income product system. On the service side, it will leverage Industrial Bank’s wealth advisory team advantages, and combine digital approaches to interpret market conditions in a timely manner—helping customers stand firm and hold their ground amid volatile markets.

It is worth noting that growth in intermediary business can not only effectively hedge the interest spread pressure brought by interest-rate declines, but also does not require using capital. It can continuously feed back into the development of credit business, forming a virtuous cycle of “intermediary business empowering credit growth, and credit business driving improvement in intermediary business.”

/ 03 /

Evolving while anchoring value

Looking back at the history of banking development, changes in the industry landscape are essentially about leading institutions accurately grasping the opportunities of the times. For example, China Merchants Bank seized the retail opportunity and became the king among joint-stock banks; Agricultural Bank seized the opportunity in lower-tier markets, and at one point its market value even surpassed that of the big state-owned banks.

Historically, before 2015, China Merchants Bank remained neither hot nor cold. For most of the time, it moved in step with the banking sector and produced few excess returns.

This is because corporate banking has always been the “pillar” of the banking industry. Although bargaining power is limited and interest spreads are lower when dealing with large clients, the advantage lies in thin margins with high turnover. However, with the gradual establishment of the ChiNext and the National Equities Exchange and Quotations (New Third Board), and the formation of a multi-tier direct financing system that took away parts of the “corporate client cake.” In addition, following the interest rate liberalization reforms in 2013 that narrowed interest spreads, the industry urgently needed a way to break the deadlock.

At this time, China Merchants Bank seized the opportunity in retail banking. By leveraging the advantage of net interest spreads from small loans and using cross-selling to generate substantial intermediary income, its profitability and performance stability stood out.

Agricultural Bank is a recent example. Last year, Agricultural Bank briefly became an A-share “stock king.” At its core, it was because it captured the dividend of county-level and rural economic development.

In recent years, the central government has continuously increased policy support in areas such as rural infrastructure construction and agricultural modernization, including fiscal subsidies and credit inclination. This has kept growth in county-level infrastructure loans and agriculture-related loans higher than that of the overall loan market. Agricultural Bank is the bank that is positioned most deeply in lower-tier markets; the number of its tier-deepening outlets is 2.3 times that of the second-ranked bank, allowing it to fully benefit from the dividend of county-level finance.

Beyond lower-tier markets, fintech characterized by high-tech innovation is another major development dividend for banks. Currently, China’s economic growth is shifting from traditional infrastructure-driven growth toward new productive forces led by technology, and the demand for loans for technology-related development is far higher than the industry average.

According to central bank data, by the end of Q4 2025, the balance of technology-based small and medium-sized enterprise loans denominated in both domestic and foreign currencies was 3.63 trillion yuan, up 19.8% year-on-year—its growth rate was 13.6 percentage points higher than that of all loans. To seize opportunities in fintech, Industrial Bank is upgrading from “three calling cards, digital Industrial Bank” to “four calling cards, smart Industrial Bank”: on top of the three calling cards of green finance, wealth banking, and investment banking, it newly adds fintech.

At present, Industrial Bank’s fintech has also achieved certain results. In 2025, Industrial Bank’s fintech financing balance reached 2 trillion yuan, up 15.98% year-on-year, ranking first among joint-stock banks in fintech loans. Fintech business also empowers the country’s development of new productive forces. For example, Industrial Bank customized the “Xinghuo Tech Support Package” for two national-level specialized and innovative “Little Giants”—Lanyue Electromechanical in Hunan—having provided 20 million yuan in pure credit loans since 2025 to help the enterprises operate steadily.

In summary, banks, as assets closely tied to industrial cycles, have always been “built by the times.” Whoever can accurately grasp the trends of industrial development and build business capabilities that fit them will win the certainty of growth.

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