Bank proprietary fund allocation "brakes"! Industry shrinks by trillions in 2025, joint-stock banks and city commercial banks lead the decline

Financial Associated Press, May 9 (Editor Wang Wei) In 2025, commercial banks’ proprietary investment funds underwent significant structural adjustments. Overall, bank-related capital is accelerating its withdrawal from public funds: according to institutional research statistics, in 2025 throughout the year, banks’ proprietary reduction in public fund holdings was about 460 billion yuan to 7.35 trillion yuan.

By type, the fund holdings of six state-owned banks are still expanding overall. By the end of 2025, their combined holdings were about 1.80 trillion yuan, a net increase of 174.8 billion yuan from 1.62 trillion yuan in 2024; joint-stock bank fund investments showed differentiation. By the end of 2025, 12 joint-stock banks’ combined holdings were about 3.28 trillion yuan, a net increase of about 130 billion yuan from 3.15 trillion yuan in 2024, but the incremental funds came only from Pudong Development Bank and Industrial Bank. The other 10 joint-stock banks collectively recorded a net reduction of 324.1 billion yuan; city commercial bank fund investments overall showed a shrinking trend, but the contraction scale of each individual bank was relatively small.

Banks’ proprietary reduction in public funds of about 460 billion yuan to 7.35 trillion yuan

In 2025, commercial banks’ proprietary investments in funds underwent significant structural adjustments. Overall, bank-related capital is accelerating its withdrawal from public funds: as disclosed in a research report by CICC, in 2025 throughout the year, banks’ proprietary reduction in public funds was about 460 billion yuan to 7.35 trillion yuan.

Looking by bank type, the fund holdings of major state-owned banks are still expanding overall. The six major banks’ combined holdings were about 1.80 trillion yuan at the end of 2025, a net increase of 174.8 billion yuan from 1.62 trillion yuan in 2024. China Construction Bank, Industrial and Commercial Bank of China, Bank of China, and Agricultural Bank of China all achieved positive growth, while only Postal Savings Bank and Bank of Communications saw declines. However, the proportion of fund investments in financial investments is generally low among major state-owned banks: Construction Bank is only 3.23%, Industrial and Commercial Bank of China is 1.19%, and Agricultural Bank of China is 0.42%. The fund investments of the six major banks are shown in the chart below:

Data source: Enterprise Early Warning, compiled by Financial Associated Press

Joint-stock bank fund investments, however, showed differentiation. According to disclosures by Enterprise Early Warning, by the end of 2025, 12 joint-stock banks’ combined holdings were about 3.28 trillion yuan, a net increase of about 130 billion yuan from 3.15 trillion yuan in 2024. However, the incremental funds came only from Pudong Development Bank and Industrial Bank. Among them, Pudong Development Bank’s 2025 fund investment scale was 885.629 billion yuan, up 400 billion yuan from 2024; Industrial Bank’s 2025 fund investment scale was 626.747 billion yuan, up 54.4 billion yuan year-on-year. After excluding these two banks, the other 10 joint-stock banks collectively recorded a net reduction of 324.1 billion yuan. Banks such as China Merchants Bank and Everbright Bank significantly cut their fund exposures.

Regarding the above behaviors, Open Source Securities stated in last September’s report, Bank Investment Funds: Current Situation Insights, Fee Reform Breakthroughs, and Logic Reshaping, that liquidity management indicators have an impact: Industrial Bank’s liquidity coverage ratio (LCR) declined or increased holdings of money market funds. From the size of financial assets immediately repaid reflected in FVTPL (financial assets measured at fair value with changes recognized in profit or loss for the current period) accounts, Industrial Bank increased by 81.6 billion yuan in 2025H1—either by increasing holdings of money market funds under LCR management requirements. Meanwhile, banks such as China Merchants Bank, Everbright Bank, and Shanghai Bank experienced fluctuations in the market value of their FVTPL accounts, which dragged down performance and triggered redemptions of some funds.

The fund investments of the 12 joint-stock banks are shown in the chart below:

Data source: Enterprise Early Warning, compiled by Financial Associated Press

City commercial bank fund investments overall showed a contraction trend, but the contraction scale of each individual bank was relatively small. According to data disclosed by Enterprise Early Warning, among 57 city commercial banks with a fund investment scale exceeding 10 billion yuan in 2025, the total fund investment scale was 26,154.32 billion yuan, down 1,711.68 billion yuan year-on-year. Among them, Jiangsu Bank’s 2025 fund investment was 3,760.5 billion yuan, up 393.2 billion yuan year-on-year; Beijing Bank, Suzhou Bank, and Sichuan Bank also increased by more than 10 billion yuan.

It is worth noting that for some small and medium-sized banks, the proportion of fund investments in financial investments has already exceeded that of most joint-stock banks. Chengde Bank ranked first with 38.26%, followed closely by Tangshan Bank at 32.39%; Hefei Technological Rural Commercial Bank reached 30.15%.

14 banks’ investment income growth rates in 2025 exceeded 30%

Because banks’ annual reports do not disclose fund investment income separately, based only on investment income (including bonds, funds, equities, foreign exchange, derivatives, and other investments), according to a prior report by Financial Associated Press, among 40 banks, 30 saw their investment income grow compared with the previous year, and 14 had growth rates of 30% or more. The chart below shows this:

(Material source: Choice data, compiled by Financial Associated Press)

A joint-stock bank stated at a performance briefing for its 2025 annual report that, among non-interest income, the fund business suffered the largest losses. There was a relatively large unrealized gain in 2024, but in 2025 it turned into a slight unrealized loss.

In its annual report, Chongqing Bank stated that in 2025, its investment income was 2.758 billion yuan, up 396 million yuan from the end of last year, an increase of 16.76%. This was mainly due to an increase in investment income generated from the disposal of bonds and from fund investments.

Why are banks reducing their public fund holdings?

CICC stated in its research report that banks’ overall reduction of public fund holdings in 2025 is first because, in a low interest-rate environment, management fee costs have relatively increased. In addition, new regulations on public fund sales constrain banks’ frequent subscription and redemption of funds. Further, the issuance of new bonds when positioning in bond funds has increased interest income value-added tax, and the tax advantages of older bonds may also lead to fund redemptions.

Based on the related classification, at the end of 2025, banks’ allocation to long-term pure-debt funds accounted for 75.6%. Affected by the above policies, this decreased by 6.6 percentage points throughout the year. Allocations to money market funds and passive index-based bond funds increased to 10.4% and 9.7% respectively. Some banks slightly increased allocations to first-tier hybrid bond funds (accounting for 2.7%).

Industrial Bank Research also stated in its research report that, affected by net value volatility, new regulations on public fund fees, and other factors, A-share listed joint-stock banks reduced their fund investments. For non-debt investment products, the average size of fund investments for these banks contracted by 22.8 billion yuan compared with the end of 2024.

Open Source Securities stated that in the first half of 2025, bank fund investments were led by yield-driven demand while also taking indicator management into account. In terms of products, banks redeemed money market funds and low-yield interest-rate bond funds and increased holdings of credit bond funds.

Looking ahead, Open Source Securities pointed out in its research report that some small banks still have considerable room to expand their fund investments. Because fund investments can only be accounted for as FVTPL under accounting standards, market value fluctuations will directly affect profit or loss for the current period. In periods when interest rates fluctuate significantly, banks holding a larger amount of funds can affect the stability of their performance. Therefore, banks with larger fund investment scales and a higher proportion of funds in their trading books have limited room for incremental growth, so they will be cautious about adding positions. Meanwhile, some small and medium-sized banks with relatively lower fund investment scales and a still-low proportion of funds in financial investments can actively expand.

(Editor: Qian Xiaorui)

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