Listed banks' ROE "Defense Battle": Only 18 have held the 10% threshold

21st Century Business Herald Reporter Yu Jixin

In recent years, the net asset return rate (ROE) of listed banks in A-shares has been under continuous pressure, with the 10% threshold becoming a key dividing line for profitability.

Under the current operating environment, bank management is focusing on core profit indicators.

Gu Jianzhong, Chairman of Shanghai Bank, straightforwardly stated at the 2025 annual and Q1 2026 performance meeting: “The cost-to-income ratio is a false proposition; what truly matters is ROE.”

Wang Liang, the recently retired president of China Merchants Bank, also emphasized: “A bank can only provide good returns to investors if it can maintain an ROE above 10%.”

However, the 21st Century Business Herald’s review of Wind data found that an increasing number of banks are falling below this “line of defense”: five years ago, in 2021, among 42 A-share listed banks, 33 had a weighted average ROE above 10%, with an industry average of 11.26%; but by the end of 2025, the number of listed banks with ROE above 10% had sharply decreased to 18, and the industry average had fallen to 9.61%. Chengdu Bank led with an ROE of 15.39%, but 7 banks had ROE below 7%.

As the industry’s “strong get stronger, weak get weaker” polarization becomes more apparent, how to improve ROE has become a core issue affecting the long-term development of banks. So, what are the driving factors behind this polarization? Despite signs of stabilization in industry interest margins in Q1 2026, the market remains closely watching this year’s ROE trends and banks’ revenue growth strategies.

A branch head of a joint-stock bank told the 21st Century Business Herald that to maintain or increase ROE, banks need to rely on “low-cost liabilities, strong asset pricing, quality assets, good customer base structure, and stable non-interest income.” He believes that “future polarization may become even more intense.”

In his view, expanding non-interest income will become a key focus for banks, and the emphasis on investment and wealth management should be tailored to each bank’s characteristics. Both short-term strategies and long-term planning are very important. He particularly stresses that all profit improvements must be based on strict risk control—“this is the crucial ‘1’; otherwise, all other efforts may be wiped out.”

Agricultural Bank and China Construction Bank Become Gatekeepers of Double-Digit ROE for Major Banks

The overall pressure and increasing polarization of ROE among listed banks reflect both industry-wide challenges and individual operational differences. The core pressure is the continuous narrowing of net interest margins—by 2025, the average net interest margin of commercial banks had fallen to a historic low of 1.42%. Meanwhile, the trend of deposit termization and “deposit relocation” has further increased banks’ liability costs, squeezing profit margins.

On the numerator side, the growth rate of net profit directly affecting ROE has slowed significantly: the year-on-year growth of net profit attributable to parent company among 42 A-share listed banks has declined from 14.76% in 2021 to 2.13% in 2025.

On the denominator side, focusing on large state-owned banks, some analyses point out that, besides common industry factors, in 2025 some large banks received special national debt injections from the Ministry of Finance, which expanded their capital base and thus diluted ROE. According to Wind data整理 by the 21st Century Business Herald, the average ROE of the six major state-owned banks in 2025 had fallen to 9.27%.

Among them, only Agricultural Bank and China Construction Bank managed to maintain ROE above 10% at the end of 2025, becoming the only “gatekeepers” of double-digit ROE among state banks. Specifically, Agricultural Bank led with an ROE of 10.16%, followed closely by China Construction Bank at 10.04%.

In contrast, the other four large state-owned banks had ROE below 10% at the end of 2025: Industrial Bank at 9.45%, Bank of China at 8.94%, Postal Savings Bank at 8.67%, and Bank of Communications at 8.38%.

Looking at the trend over the past five years, the ROE of the six major state-owned banks has been steadily declining. Among them, Bank of Communications experienced the largest single-year drop in 2025, with ROE falling from 9.08% to 8.38%, a decrease of 0.70 percentage points. Over five years, Postal Savings Bank saw the most significant decline, with ROE dropping from 11.86% in 2021 to 8.67% in 2025, a cumulative decrease of 3.19 percentage points.

Bank of China President Zhang Yi specifically mentioned at the 2025 performance meeting: “All business segments have achieved effective qualitative improvement and reasonable quantitative growth. In 2025, China Construction Bank achieved ‘double growth’ in operating income and net profit, with profit performance improving quarter by quarter; core indicators such as net interest margin at 1.34% and ROE at 10.04% remain industry-leading.”

Only one joint-stock bank, China Merchants Bank, maintains ROE above 10%

Compared to state banks, joint-stock banks have become a “valley” of ROE decline. Data shows that in 2025, the average ROE of nine listed joint-stock banks was only 8.33%, relatively low among different bank types. Currently, only China Merchants Bank maintains an ROE above 10%, with a stark gap between the top and middle tiers.

Looking back to 2021, four joint-stock banks—招商银行 (China Merchants Bank), Industrial Bank, Ping An Bank, and CITIC Bank—had ROE above 10%. By 2025, only China Merchants Bank remains in this category. With an ROE of 13.44%, China Merchants Bank stands out as the “leader” among joint-stock banks, which also supports the confidence expressed by President Wang Liang at the beginning of this article.

Currently, CITIC Bank, Ping An Bank, and Industrial Bank have ROEs of 9.39%, 9.15%, and 9.15%, forming the second echelon. The weaker banks face greater pressure: Minsheng Bank’s ROE is only 4.93%, ranking at the bottom among joint-stock banks; Shanghai Pudong Bank and Zhejiang Commercial Bank have ROEs of 6.76% and 6.80%, respectively.

From the timeline perspective, 2023 was the most challenging year for many joint-stock banks’ ROE decline. For example, Industrial Bank’s ROE plummeted from 13.85% in 2022 to 10.64% in 2023, a single-year drop of 3.21 percentage points.

Wang Liang stated at the “farewell performance” of the joint-stock bank: “The board and management attach great importance to ROE management. They judge that future ROE will continue to decline, and will control the downward pace with a bottom line of 10%. China Merchants Bank’s ROE currently remains ahead of domestic and foreign banks, and we will do our best to manage it well.”

More than half of listed city commercial banks still have ROE above 10%

Among various types of banks, city commercial banks, relying on regional credit customer resources and特色业务, seem to perform relatively well.

The 21st Century Business Herald’s review shows that 17 listed city commercial banks had an average ROE of 10.22% in 2025, the only group with an average still above 10%. However, their internal profitability gap is also significant, showing a clear stratification.

Among them, Chengdu Bank has maintained the top position in A-share bank ROE for five consecutive years. Although its 2025 ROE of 15.39% has declined from the high point of 17.60% in 2021, it still leads by a large margin. Hangzhou Bank, Jiangsu Bank, and Ningbo Bank have ROEs of 14.65%, 13.14%, and 13.11%, forming a stable second tier.

Overall, in 2025, nine city commercial banks maintained ROE above 10%, accounting for more than half, including Qingdao Bank, Qilu Bank, Nanjing Bank, Changsha Bank, and Suzhou Bank, demonstrating strong profitability resilience.

However, some city commercial banks face challenges: Zhengzhou Bank’s ROE has fallen from 7.17% in 2021 to 3.16% in 2025, remaining at the bottom of the industry for a long time. Beijing Bank’s ROE declined from 10.29% in 2021 to 6.11% in 2025.

Industry insiders believe that under the widespread pressure of narrowing net interest margins, differences in operational quality and asset quality among regional banks are further emerging.

Changshu Bank remains the “leader” among rural commercial banks

The ROE performance of listed rural commercial banks shows a pattern of “strong get stronger, tail-end under pressure.” The 2025 average ROE of 10 sampled rural commercial banks is 9.92%. Among them, Changshu Bank leads with an ROE of 14.05%, significantly above the industry average of 9.92%. Over the past five years, its ROE has consistently stayed above 10%, demonstrating strong profitability resilience.

In addition, Sucun Bank, Jiangyin Bank, Zhangjiagang Bank, Ruifeng Bank, and Wuxi Bank all have ROEs of 10% or above, forming the “elite” group of rural commercial banks, with ROEs of 10.84%, 10.71%, 10.36%, 10.20%, and 10.05%, respectively. Ruifeng Bank’s ROE has been very stable over the past five years, showing excellent stability; Sucun Bank’s profitability has shown a steady upward trend.

Conversely, tail-end institutions face greater adjustment pressure. Zijin Bank’s ROE has declined from 9.85% in 2021 to 6.17% in 2025, a cumulative drop of 3.68 percentage points. Qingnong Commercial Bank’s ROE also fell from 10.63% in 2021 to 7.94% in 2025, dropping below 8%. Yunnan Rural Commercial Bank and Shanghai Rural Commercial Bank, two large rural commercial banks, also failed to maintain ROE above 10% in 2025.

Interest margin, deposit costs, and transformation challenges

Deeply analyzing the reasons for ROE differentiation, Lin Yingqi, a banking analyst and director at China International Capital Corporation, told the 21st Century Business Herald: “The main reasons for the decline in bank ROE are the economic transformation background leading to slowing loan growth, continuous decline in net interest margins, and increased provisioning pressures.” He pointed out that under the trend of deposit relocation, competition for liabilities is fierce, and non-performing assets in retail and real estate sectors are still being resolved. Top-tier banks with lower liability costs and stable asset quality can maintain relatively higher ROE.

Liu Chengxiang, chief analyst of banking at Kaiyuan Securities, said that by the end of 2025, only 18 listed banks had ROE above 10%, mainly because the interest rate cut wave and narrowing interest margins squeezed traditional loan and deposit profits, forcing banks to seek new growth points. The deposit relocation trend has intensified liability competition, making liability cost control a key dividing line. Banks that proactively upgrade strategies—such as realizing floating gains from revolving bonds, developing wealth management income, or leveraging licensing advantages in foreign exchange—can sustain higher ROE in a low-interest environment; others may face shrinking interest margins, deposit outflows, and profit pressure. Therefore, industry-wide pressures have amplified the capability gap among banks.

A staff member from a city commercial bank’s capital operation center told the reporter that to maintain ROE, listed banks must focus on whether asset quality continues to deteriorate and whether they can stop the downward trend, which leads to differences in provisioning among banks. Additionally, whether non-interest income can be increased is another factor driving ROE divergence.

He believes that “in the current transformation and upgrading of banking business, one important direction is shifting from risk control through deposit-based lending and interest margin accumulation to asset securitization as a means of raising funds, forming a transaction-based banking model that continuously securitizes assets and earns management fees, which can also be called ‘traditional commercial banking transformed into investment banking’.”

Facing challenges, the banking industry is actively seeking breakthroughs. In Q1 2026, the industry has reached a critical turning point, with net interest margins gradually stabilizing and rebounding, and over 80% of banks’ net interest income turning positive year-on-year. This creates favorable conditions for ROE stabilization.

Regarding the outlook for bank ROE in 2026, Liu Chengxiang predicts that the rebound will be driven by three factors:

First, the net interest margin has already turned at the inflection point—Q1 2026 estimates show an increase of 1 basis point over 2025 to 1.40%, and liability costs continue to decline due to high-interest fixed deposits maturing and re-pricing, as well as foreign exchange settlement funds being deposited, with most assets entering a positive interest margin stage, significantly reducing the drag on ROE.

Second, revenue growth has improved markedly—Q1 2026, listed banks’ revenue increased by 7.6% year-on-year, non-interest income remained stable, and financial investment gains can still be flexibly realized.

Third, overall asset quality remains healthy, with low credit costs, providing a more sustainable foundation for annual ROE.

However, he also reminds that internal differentiation remains obvious: high-quality city commercial banks, leveraging balance sheet expansion, asset pricing power, and non-interest income advantages, are expected to continue leading in ROE; large state-owned banks benefit from rapid liability cost improvements and foreign exchange dividends, with ROE slightly rising; some joint-stock banks still face liability pressures, limiting ROE improvement; and some rural commercial banks, due to increased attention and limited provisioning space, may have relatively low absolute ROE levels.

“Overall, in 2026, bank ROE will move away from a single downward trend, but from an investor’s perspective, ‘selective banking’ remains key to obtaining excess returns,” he told the reporter.

Regarding strategies to boost bank profitability, Lin Yingqi pointed out that first, controlling liability costs and accumulating funds through wealth management; second, expanding into AIC equity investments and sci-tech finance; third, developing cross-border outbound and light-capital intermediary businesses to reduce reliance on traditional credit and improve overall returns.

Liu Chengxiang believes that: first, optimizing pricing—allocating risk-adjusted returns reasonably on the asset side, and analyzing customer interest sensitivity on the liability side for differentiated pricing; second, flexible balance sheet expansion—using bond investments to manage surplus liquidity, increasing long-term bonds when rates are favorable to lock in yields, and utilizing asset circulation to activate low-efficiency assets and improve overall asset yield; third, supplementing fee income—leveraging wealth management subsidiaries to transform deposit relocation into asset management product growth, consolidating funds and contributing to fee income; fourth, provisioning management—flexibly writing off, transferring, and recovering non-performing loans, accelerating the disposal of risky assets, reducing credit costs, and recovering some written-off assets for additional gains, while balancing provisioning consumption and capital adequacy to avoid erosion of core Tier 1 capital due to deferred tax assets.