China’s six major state-owned banks, including Industrial and Commercial Bank of China, recently released their first-quarter reports for 2025. The reports indicate that due to economic downward pressure, continuous narrowing of net interest margins, and various other factors, the overall performance of the six major banks has been poor, with both revenue and net profits declining.
Experts suggest that the decline in profits of the Chinese banking industry is closely related to the current overall weakness of the Chinese economy, with the US-China trade war being one of the main driving factors. Some analysts believe that the current decline in Chinese bank profits is a concentrated manifestation of structural problems in the Chinese economy.
According to the first-quarter data, Industrial and Commercial Bank of China, China Construction Bank, Bank of China, Agricultural Bank of China, Bank of Communications, and Postal Savings Bank of China collectively achieved revenues of approximately 910.2 billion yuan, a decrease of 13.9 billion yuan compared to the same period last year, a decrease of about 1.5%; the total net profit attributable to shareholders was 344.42 billion yuan, a decrease of 7.339 billion yuan, a decrease of about 2%. Among them, four banks saw negative revenue growth. Despite being the only bank with quarterly revenue exceeding 200 billion yuan, Industrial and Commercial Bank of China saw a 3.2% year-on-year decline, while China Construction Bank experienced a more significant revenue decline.
In terms of profitability, both Industrial and Commercial Bank of China and China Construction Bank saw nearly a 4% year-on-year decline in net profits attributable to shareholders, further widening the decline compared to the first quarter of 2024. Bank of China and Postal Savings Bank of China saw respective declines of 2.9% and 2.62% in net profits.
Taiwanese economist Wu Jialong, in an interview with Dajiyuan, analyzed that the overall deterioration of state-owned Chinese banks’ performance reflects the severe recession facing the Chinese economy.
Analyses by financial institutions indicate that the factors putting pressure on the banking industry’s performance in the first quarter mainly include intensified repricing of loans leading to downward pressure on net interest margins, a slowdown in asset expansion pace, increased income tax rates, weakened support from reserves, and increased volatility in non-interest income.
Net interest margin is an important indicator of a bank’s profitability. In the first quarter of 2025, all six major banks saw a decline in net interest margins, all dropping below 1.8%, with Postal Savings Bank of China having the highest margin at 1.71%, while Bank of Communications was as low as 1.23%.
Looking at the loan structure, corporate loans remain the main support for credit expansion for the six major banks, with growth rates remaining above 5% in the first quarter. However, growth in personal loans was weak, reflecting subdued consumer demand, echoing the current economic downturn.
In recent years, some Chinese state-owned banks have implemented strict limits on withdrawals for depositors, which has sparked widespread concern and strong dissatisfaction among depositors. This not only inconveniences depositors in their daily lives but also exacerbates public concerns about the liquidity situation in banks, with depositors questioning whether there are issues of tight fund chains or improper risk management within the banks.
Experts suggest that withdrawal restrictions may be related to banks’ strategies to cope with rising non-performing loans and increased liquidity pressure, but frequent restrictive measures undoubtedly undermine public trust in the banking industry.
Taiwanese financial expert Huang Shicong believes that the main reason for the current decline in profits of Chinese banks is a concentrated reflection of structural problems in the Chinese economy. Currently, China is in an interest rate reduction cycle, with the real estate market continuing to decline, leading to a significant narrowing of banks’ net interest margins and subsequently affecting overall profitability.
Wu Jialong also noted that China’s economy is currently facing multiple pressures: restricted exports, unresolved real estate crises, tight local finances, rising unemployment rates, and continuous capital outflows, all intertwined issues that exacerbate the risk of economic downturn.
“The decline in bank profits is a direct reflection of these deep-seated crises and also heralds a further deterioration in the overall economic situation in the future.”
Huang Shicong told Dajiyuan that the current decline in performance of Chinese banks is mainly due to domestic factors, and the impact of the trade war may become more significant in the second quarter of this year. He advised continued monitoring of second-quarter data, especially changes in bank profits, to further assess the substantive impact of the trade war on the Chinese economy.
Recently, the US-China trade war has escalated, posing a severe threat to China’s economy and employment stability, with a significant drop in export orders for China.
The latest economic data indicates that Chinese factory activity has dropped to the lowest level in over a year. The stagnant production situation is intensifying, with tens of thousands of jobs at risk. Despite this, the Chinese authorities are accused of deliberately concealing the severity of the economic damage.
Wu Jialong believes that the decline in profits of Chinese banks is closely related to the current overall weakness of the Chinese economy, with the ongoing US-China trade war being a major driver.
He further stated that the large-scale imposition of tariffs by the United States on Chinese goods has severely squeezed China’s export market. With a significant reduction in export orders that were heavily reliant on the US, Chinese enterprises have lost an essential channel for exports.
In the backdrop of shrinking export orders and the inability to place production capacity, it is an indisputable fact that the Chinese economy is now in a state of decline.